A month has gone by since the last earnings report for AmerisourceBergen (ABC). Shares have added about 11.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is AmerisourceBergen due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
AmerisourceBergen Q1 Earnings & Revenues Top Estimates
AmerisourceBergen Corporationreported second-quarter fiscal 2020 adjusted earnings per shareof $2.40 surpassing the Zacks Consensus Estimate of $2.28 by 5.3%. The bottom line also improved 13.7% year over year.
The better-than-expected bottom-line performance can be attributed to increase in adjusted operating income and lower share count.
Revenues improved 9.5% to $47.42 billion in the reported quarter. Further, the top line outpaced the Zacks Consensus Estimate by 3.2%.
Pharmaceutical Distribution Segment
Revenues at this segment totaled $45.56 billion, improving 9.3% on a year-over-year basis. Consistent robust specialty product sales and increase in volume related to growth of some of its largest customers and overall market growth contributed to the improvement.
Segmental operating income was $563.1 million, up 8.9% year over year. Increase in gross profit drove the upside.
This segment includes AmerisourceBergen Consulting Services (ABCS), World Courier and MWI Veterinary Supply.
Revenues at this segment came in at $1.88 billion, up 12.7% year over year. This upside was driven by growth across all three operating segments —¬MWI, ABCS and World Courier.
Operating income in the segment was $108.3 million in the quarter, up 8.4% year over year primarily on the back of the performance of MWI and ABCS.
In the quarter under review, AmerisourceBergen reported adjusted gross profit of $1.42 billion, up 7.5% on a year-over-year basis. As a percentage of revenues, adjusted gross margin was 2.9% in the quarter, down 5 bps from the year-ago quarter.
The company reported adjusted operating income of $671.7 million, up 8.9% year over year. As a percentage of revenues, adjusted operating margin was 1.4% in the quarter, which remained flat from the prior-year quarter.
Fiscal 2020 Guidance Updated
AmerisourceBergen has updated fiscal year 2020 outlook, reflecting its sustained strong performance, prudent share buybacks in the quarter under review and potential impact of COVID-19 in the second half of the fiscal year.
Adjusted EPS is now estimated in the range of $7.35-$7.65 (down from the previously guided range of $7.55-$7.80). The Zacks Consensus Estimate is currently pegged at $7.30.
The company estimates revenue growth in the low-to-mid-single digit percent range (down from the previously guided range of mid-to-high-single digit percent range).
Adjusted operating income is now projected to grow in the low-to-mid-single digit percent range (widened from the previously guided mid-single-digit percent range).
Adjusted operating expenses is projected to increase in the low-single digit percent range (down from the previously guided mid-single digit percent range).
Operating income at Pharmaceutical Distribution Services segment is now anticipated to improve in the low-to-mid-single digit percent range (widened from the mid-single digit percent range).
Further, the company now anticipates weighted average diluted shares to range between 206 million and 207 million (down from the prior estimate of 208 million).
Nonetheless, the company has reaffirmed all the other previously communicated aspects of its fiscal 2020 guidance and assumptions, which are as follows:
For the Other segment the metric is estimated to grow in the high-single digit percent range.
Adjusted free cash flow is estimated to be around $1.5 billion.
The company anticipates adjusted effective tax rate in the range of 21-22%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -5.6% due to these changes.
Currently, AmerisourceBergen has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, AmerisourceBergen has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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