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AmerisourceBergen (ABC) Q3 Earnings: What's in the Offing?

Zacks Equity Research

AmerisourceBergen Corporation ABC is scheduled to release third-quarter fiscal 2019 results on Aug 1, before the opening bell.

In the last reported quarter, the company delivered a positive earnings surprise of 7.7%. Further, it has an average four-quarter positive surprise of 5.3%.

Let's take a look at how things are shaping up prior to this announcement.

Which Way are Q3 Estimates Treading?

For the quarter to be reported, the Zacks Consensus Estimate for revenues is pegged at $45.19 billion, indicating an improvement of 4.8% from the year-ago quarter. The consensus estimate for earnings is pegged at $1.63, suggesting growth of 5.8% from the year-ago reported figure.

AmerisourceBergen Corporation Price and EPS Surprise


AmerisourceBergen Corporation Price and EPS Surprise
AmerisourceBergen Corporation Price and EPS Surprise

AmerisourceBergen Corporation price-eps-surprise | AmerisourceBergen Corporation Quote

Pharmaceutical Distribution Unit to Drive Q3

Increasing volume and expanding customer base at this segment are likely to bolster revenues. This segment serves healthcare providers in the pharmaceutical supply channel. Continued strength in Specialty Distribution, especially Oncology, solid organic growth rates in the U.S. pharmaceutical market, and improving patient access to medical care are likely to contribute to the to-be-reported quarter’s top line.

The Zacks Consensus Estimate for Pharmaceutical Distribution stands at $43.93 billion, indicating an improvement of 5.7% from the year-ago quarter.

However, the company has lowered guidance for operating income growth in this segment. The metric is estimated to be in the low-single digit percentage range.

Other Factors to Consider

World Courier unit

The World Courier unit, in particular, is likely to act as a key catalyst of the Other segment. Bolstering customer experience through new offerings, technology improvements and delivery of high tax logistics services is likely to lead to the better-than-expected performance at this business.

The company has likely exhibited significant revenue growth on the back of solid demand for its high touch global specialty logistics.

Moreover, the World Courier business delivered excellent results, with record gains in the last reported quarter. The unit witnessed substantial operating income growth as well. We anticipate the trends in sustain in the third quarter as well.

Other Segment

This segment consists of Global Commercialization Services and Animal Health, and includes World Courier, AmerisourceBergen Consulting and MWI. The company anticipates the segment to drive the top line in the to-be-reported quarter, backed by growth in Canadian operations and World Courier unit and revenues from MWI.

In fact, the Zacks Consensus Estimate for fiscal third-quarter revenues for this segment is pegged at $1.67 billion, suggesting growth of 4.4% year-ago reported figure.

This apart, the company is likely to benefit from generics growth in the to-be-reported quarter. Further, new product launches are likely to contribute to overall performance.

However, for fiscal 2019, the company anticipates PharMEDium to be a headwind of around 3%, which represents an adjusted operating loss of approximately $50 million. Consequently, we expect to this to affect the upcoming quarterly results.

Moreover, stiff competition, as the company operates in a highly competitive pharmaceutical distribution and related health care services market, will impact the performance in the to-be-reported quarter.

The company has raised adjusted EPS guidance for fiscal 2019 (currently adjusted EPS is estimated in the range of $6.70-$6.90, up from the previously guided range of $6.65-$6.85). Therefore, the company expects the bottom line to improve in the fiscal third quarter backed by lower share count, possible higher operating income and lower net interest expense.

What Our Quantitative Model Suggests

Our proven model clearly indicates that a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to deliver a positive earnings surprise. This is the case here.

Earnings ESP: AmerisourceBergen has an Earnings ESP of +0.82%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Zacks Rank: AmerisourceBergen carries a Zacks Rank #3.

Please note that we caution against stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks Worth a Look

Here are some other medical stocks worth considering as these too have the right combination of elements to post an earnings beat this quarter.

Henry Schein, Inc. HSIC has an Earnings ESP of +2.41% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

DENTSPLY SIRONA XRAY has an Earnings ESP of +6.95% and a Zacks Rank #1.

Allena Pharmaceuticals, Inc. ALNA has an Earnings ESP of +7.55% and a Zacks Rank #2.

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