AmerisourceBergen Corporation ( ABC - Analyst Report ) posted second quarter fiscal 2012 earnings of 81 cents per share, in line with the Zacks Consensus Estimate. However, earnings increased 5.2% from the year-ago period, spurred by higher revenues and a lower share count.

Revenues

Total revenue for the second quarter edged up 1.6% to $20.1 billion, which were also in line with the Zacks Consensus Estimate. The modest advance in revenues was the result of a 6% increase in AmerisourceBergen Specialty Group’s revenue.

The revenue increase for the AmerisourceBergen Specialty Group segment was driven by growth in third party logistics and vaccine and physician office distribution business. The robust performance of AmerisourceBergen Drug Corporation’s institutional segment was offset by the loss of a significant retail customer. TheraCom, a recent acquisition, also contributed toward the quarter’s revenues.

Other Details

Gross profit for the quarter inched up 1.1% to $695.1 million, driven by contribution from the company’s recent acquisitions and distribution of generic pharmaceuticals.

As a result of higher gross profit, operating income also increased 0.8% to $368.1 million. AmerisourceBergen bought back 17.4 million shares during the second quarter of fiscal 2012.

Outlook Reaffirmed

The company reiterated its fiscal 2012 earnings expectation of $2.74 – $2.84 per share. The current fiscal 2012 Zacks Consensus Estimate of $2.82 lies at the higher end of the guidance range.

AmerisourceBergen continues to project flat-to-modest revenue growth, and intends to spend about $500 million on share repurchases in 2012.

The company expects operating margin to grow in the high single-digit basis points range. Free cash flow, which includes capital expenditures of about $200 million, is expected in the range of $800 to $900 million.

Medco Health Agreement

Medco Health Solutions is AmerisourceBergen’s largest customer and accounted for 19% of total revenue in fiscal 2011. Medco Health merged with Express Scripts ( ESRX - Analyst Report ) this month, as a result of which AmerisourceBergen and Medco Health amended their agreement to provide for their contract to end upon the award and implementation of one or more new pharmaceutical distribution agreements.

AmerisourceBergen does not expect the existing agreement to have any impact on fiscal 2012.

Our View

We currently have a Neutral recommendation on AmerisourceBergen. The stock carries a Zacks #3 Rank (Hold) in the short-run. We believe the company is well-positioned for growth given the strong performance of its generics business.

However, the company operates in the highly competitive pharmaceutical distribution market, with players like Cardinal Health Inc. ( CAH - Analyst Report ) and McKesson Corporation ( MCK - Analyst Report ) .