A month has gone by since the last earnings report for AmerisourceBergen (ABC). Shares have lost about 5.1% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is AmerisourceBergen due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
AmerisourceBergen Q1 Earnings Beat, Revenues Miss
AmerisourceBergen Corporation reported first-quarter fiscal 2020 adjusted earnings per share of $1.76 surpassing the Zacks Consensus Estimate of $1.67 by 5.4%. The figure also improved 10% year over year.
The better-than-expected bottom-line performance can be attributed to increase in adjusted operating income, lower share count and reduced net interest expense.
Revenues improved 5.4% to $47.86 billion in the reported quarter. The figure also beat the Zacks Consensus Estimate by 0.3%.
Pharmaceutical Distribution Segment
Revenues at this segment totaled $46.04 billion, improving 5.2% on a year-over-year basis. Consistent robust specialty product sales and increase in volume related to growth of some of its largest customers contributed to the improvement.
Segmental operating income was $391.7 million, up 5% 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 $1.85 billion, up 10.5% year over year. This upside was driven by growth in MWI, ABCS and World Courier.
Operating income in the segment was $104.5 million in the quarter, up 14.9% year over year primarily on the back of the performance of World Courier and ABCS.
In the quarter under review, AmerisourceBergen reported adjusted gross profit of $1.24 billion, up 3.3% on a year-over-year basis. As a percentage of revenues, adjusted gross margin was 2.6% in the quarter, down 5 bps from the year-ago quarter.
AmerisourceBergen reported adjusted operating income of $495.2 million, up 5% year over year. As a percentage of revenues, adjusted operating margin was 1% in the quarter, which was down 1 basis point from the prior-year quarter.
Fiscal 2020 Guidance Updated
AmerisourceBergen has updated fiscal year 2020 outlook, reflecting the company’s strong performance, prudent share buybacks and the exit of the PharMEDium business.
Adjusted EPS is now estimated in the range of $7.55-$7.80 (up from the previously guided range of $7.30-$7.60). The Zacks Consensus Estimate is currently pegged at $7.53, which is below management’s guided range.
Adjusted operating income is now projected to grow in the mid-single-digit percent range, up from the previously guided low-to-mid single digit percent range.
Operating income at Pharmaceutical Distribution Services segment is now anticipated to improve in the mid-single digit percent range up from the low-to-mid single digit percent range.
Further, the company now anticipates weighted average diluted shares to be around 208 million (down from the previously guided band of 209-210 million).
Nonetheless, the company has reaffirmed all the other previously communicated aspects of its fiscal 2020 guidance and assumptions, which are as follows:
The company estimates revenue growth in the mid-to-high single digit percent range.
For the Other segment the metric is estimated to grow in the high-single digit percent range.
Adjusted operating expenses is projected to increase in the mid-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?
Fresh estimates followed an upward path over the past two months.
At this time, AmerisourceBergen has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, 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.
AmerisourceBergen has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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