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What's in Store for AmerisourceBergen (ABC) in Q2 Earnings?

Zacks Equity Research

AmerisourceBergen Corporation ABC is scheduled to release second-quarter fiscal 2019 results on May 2, before the opening bell.

In the last reported quarter, the company delivered a positive earnings surprise of 6.7%. Further, it has an average four-quarter positive surprise of 4.9%.

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

Which Way are Q2 Estimates Treading?

For the quarter to be reported, the Zacks Consensus Estimate for revenues is pegged at $43.7 billion, indicating an improvement of 6.4% from the year-ago quarter. The consensus estimate for earnings is pegged at $1.96, suggesting growth of 1% from the year-ago reported figure.

Pharmaceutical Distribution Unit to Drive Q2

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, along with solid organic growth rates in the U.S. pharmaceutical market and improving patient access to medical care are likely to have contributed to anticipated top-line growth.

The Zacks Consensus Estimate for Pharmaceutical Distribution stands at $41.81 billion, indicating an improvement of 5.9% 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.

AmerisourceBergen Corporation Price and EPS Surprise


AmerisourceBergen Corporation Price and EPS Surprise | AmerisourceBergen Corporation Quote

Other Factors to Consider

World Courier unit

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

Moreover, the World Courier business delivered excellent results, with record gains in the last reported quarter. The unit witnessed outstanding operating income growth as well. We expect the trends in sustain in the second 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 deliver revenue growth in the second quarter, backed by growth in Canadian operations and World Courier unit as well as revenues from MWI.

In fact, the Zacks Consensus Estimate for fiscal second-quarter revenues for this segment is pegged at $1.69 billion, suggesting a rise of 6% year-ago reported figure.

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

However, for fiscal 2019, the company anticipates operating income growth in the low-single digit percent range to reflect the impact to revise expectations at PharMEDium. We expect to this to impact the results in the to-be-reported quarter as well.

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.

Although the company has lowered the adjusted EPS guidance for fiscal 2019 (currently adjusted EPS is estimated in the range of $6.65-$6.85, down from the previously guided range of $6.65-$6.95), the company expects the bottom line to improve in the fiscal second quarter backed by taxes and share count.

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 +0.26%. 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.

Other Stocks Worth a Look

Here are some other stocks worth considering from the broader medical space as these too have the right combination of elements to beat on earnings this time around.

Teleflex Incorporated TFX has an Earnings ESP of +1.65% and a Zacks Rank #3.

Cardinal Health, Inc. CAH has an Earnings ESP of +1.13% and a Zacks Rank #3.

STERIS plc STE has an Earnings ESP of +0.35% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here . 

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