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AmerisourceBergen Beats on Q4 Earnings, Guides Well

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AmerisourceBergen Corp. (ABC) posted earnings (excluding employee severance, LIFO expense, warrants, litigation, restructuring and acquisition costs) of $1.10 per share in the fourth quarter of fiscal 2014 (ended Sep 30, 2014), which beat the Zacks Consensus Estimate of $1.05 and were above the year-ago figure of 81 cents per share.

AmerisourceBergen Corporation - Earnings Surprise | FindTheBest

Revenues grew 29.1% to $31.6 billion in the fourth quarter of fiscal 2014. Reported revenues easily surpassed the Zacks Consensus Estimate of $30.6 billion.

Fiscal Fourth Quarter in Detail

The company reports results of the AmerisourceBergen Drug Corp. (ABDC) and AmerisourceBergen Specialty Group (:ABSG) units under the Pharmaceutical Distribution segment. Results of the World Courier Group and AmerisourceBergen Consulting Services (:ABCS) have been clubbed under the Other segment.

Revenues from the Pharmaceutical Distribution segment surged 29.2% to $31 billion. Within this segment, revenues from the ABDC business increased 33% primarily due to the onboarding of the new-branded pharmaceuticals business from Walgreens (WAG) and a substantial portion of their generic pharmaceuticals business along with increased branded pharmaceutical sales to other large customers.

The ABSG unit also performed well during the quarter with revenues increasing 13% y/y. Results of the segment were driven by solid performance of blood products, vaccine and specialty distribution businesses.

Revenues from the Other segment were $652.2 million, up 25.8% y/y.

Gross profit (adjusted) for the quarter increased 28.7% y/y to $926.9 million primarily due to strong revenue growth and solid generic sales in the ABDC segment.

Operating expenses (adjusted) during the quarter grew 27.5% to $503.1 million due to the onboarding of the new business from Walgreens.

Fiscal 2014 Results

Revenues came in at $119.6 billion in fiscal 2014, up 35.9% from fiscal 2013 and easily beat the Zacks Consensus Estimate of $118.7 billion. Earnings came in at $3.97 per share, up from $3.21 in fiscal 2013 and beat the Zacks Consensus Estimate of $3.91 per share.

Fiscal 2015 Guidance

AmerisourceBergen expects earnings from continuing operations in the range of $4.36–$4.50 per share in fiscal 2015, an increase of 10%–13% from fiscal 2014. The pre-earnings Zacks Consensus Estimate of $4.37 is towards the low end of the guidance.

AmerisourceBergen expects revenues to grow around 7%–8% in fiscal 2015. Operating margins are projected to be flat to up slightly in the low single-digit basis points range.

Our Take

We are encouraged by the solid fiscal fourth-quarter results, which beat the Zacks Consensus Estimate on both fronts driven by the onboarding of substantial new business from Walgreens.

We remind investors that AmerisourceBergen had entered into a strategic agreement with Walgreen and Alliance Boots GmbH in fiscal 2013. The agreement includes a 10-year pharmaceutical distribution contract with Walgreens and an access to generic drugs and related pharmaceutical products through the Walgreens & Alliance Boots Development joint venture. We believe that the distribution deal with Walgreens has positively impacted results in fiscal 2014 and will continue to do so in fiscal 2015.

AmerisourceBergen currently carries a Zacks Rank #4 (Sell). The solid fiscal fourth-quarter results and positive guidance for fiscal 2015 should boost investor confidence.

Better-ranked stocks in the health care sector include Cardinal Health (CAH) and McKesson Corp. (MCK). Both carry a Zacks Rank #2 (Buy).

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Read the Full Research Report on CAH
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Read the Full Research Report on WAG

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