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AmerisourceBergen (ABC - Analyst Report) is set to report fiscal third quarter 2014 results on Jul 24, 2014.

Last quarter, AmerisourceBergen reported a 6.00% positive surprise. AmerisourceBergen has delivered positive earnings surprises in three of the last four quarters with an average beat of 3.17%.

Factors at Play

AmerisourceBergen had entered into a strategic agreement with Walgreen (WAG - Analyst Report) and Alliance Boots GmbH in fiscal 2013. The agreement includes a 10-year pharmaceutical distribution contract with Walgreen and access to generic drugs and related pharmaceutical products through the Walgreens Boots Alliance Development joint venture. We believe the distribution deal with Walgreen will positively impact sales in the third quarter.

However, operating margin is expected to be under pressure in 2014 due to revenue mix shift to lower margin business and on boarding of the Walgreen contract. Operating expenses are also estimated to increase as the company continues to invest in its core drug business to support substantial volume growth and maintain high service levels.

Earnings Whispers?

Our proven model does not conclusively show that AmerisourceBergen is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Zacks ESP: The ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate Estimate and Zacks Consensus Estimate currently stand at 92 cents.

Zacks Rank #2 (Buy): AmerisourceBergen’s Zacks Rank #2 when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies in the broader healthcare sector that you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Impax Laboratories Inc. (IPXL - Snapshot Report) has an Earnings ESP of +26.83% and holds a Zacks Rank #3 (Hold). Impax will report second quarter earnings on Aug 6.

Mallinckrodt plc (MNK - Analyst Report) has an Earnings ESP of +2.33% and holds a Zacks Rank #1 (Strong Buy). Mallinckrodt will report third quarter earnings on Aug 7.

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