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AmerisourceBergen Corporation’s (ABC - Analyst Report) fourth quarter fiscal 2012 earnings (excluding employee severance and acquisition costs) of 72 cents per share beat the Zacks Consensus Estimate of 68 cents and the year-ago earnings by 23%. A lower share count aided fourth quarter earnings.

Fourth quarter revenues slipped 4.4% to $19.5 billion. Revenues fell short of the Zacks Consensus Estimate of $20.2 billion.

The company’s fiscal 2012 earnings (excluding employee severance and acquisition costs) of $2.87 per share beat the Zacks Consensus Estimate of $2.83 and the year-ago earnings by 12%. A lower share count aided fiscal 2012 earnings.

Total revenue for the year slipped 0.6% to $79.5 billion. Revenues fell short of the Zacks Consensus Estimate of $80.3 billion.

Quarter in Details

Following the acquisition of World Courier Group earlier in the year, AmerisourceBergen made some adjustments in its reporting format. The company decided to report results of the ABDC and ABSG units under the Pharmaceutical Distribution segment. Results of the World Courier Group and ABCS have been clubbed under the “Other” head.

The decline in total revenues in the reported quarter was primarily attributable to the disappointing performance of the ABDC unit, where sales slipped 8%.

Revenues from the Pharmaceutical Distribution segment, which accounted for 98% of total revenues, slipped 6% to $19.1 billion during the reported quarter.

The ABSG unit performed well during the quarter with sales climbing 6%. Results of the segment were boosted by growth in third party logistics and vaccine and physician office distribution business at AmerisourceBergen. Revenues were boosted by $335 million by AmerisourceBergen’s acquisitions of World Courier and TheraCom.

Gross profit for the quarter climbed 18.6% to $719.5 million. Gross profit was boosted by AmerisourceBergen’s recent acquisitions and the encouraging performance of generic pharmaceuticals.

Operating expenses (excluding employee severance and acquisition costs) during the quarter climbed 16.2% to $394.1 million.

The quarter saw AmerisourceBergen buy back shares worth $648 million.

We note that AmerisourceBergen authorized a new share repurchase program of $750 million, having completed the earlier $650 million share buyback program – this should help boost the bottom line. Currently, the total authorized amount for repurchases stands at $847 million. We believe that the buyback program highlights the company’s commitment to return value to shareholders.

Along with the fourth quarter results, the company announced that it plans to sell its contract pharmaceutical packaging business, AndersonBrecon in order to streamline its operations. This business has been classified by the company as discontinued operations.

Outlook for Fiscal 2013

The company expects diluted earnings from continuing operations in the range of $3.06 to $3.16 per share, reflecting year over year growth of 11% – 14%. The company expects revenues to grow in the range of 6% – 9%. The company plans to repurchase shares worth at least $200 million in 2013.

Our Recommendation

We currently have a Neutral recommendation on AmerisourceBergen. The stock carries a Zacks #3 Rank (short-term Hold rating).

We believe the company is well positioned for growth given the strong performance of its generics business. However, competition in the pharmaceutical distribution market remains tough, which includes players like McKesson Corporation (MCK - Analyst Report).

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