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Here's Why You Should Retain AmerisourceBergen (ABC) Now
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AmerisourceBergen Corporation is well poised for growth on the back of its robust pharmaceutical distribution business and new product offerings. Intense competition remains a concern.
The stock has gained 23.1%, compared with the industry’s growth of 17.5% in a year’s time. Meanwhile, the S&P 500 Index rallied 20.7% in the same time frame.
AmerisourceBergen — with a market capitalization of $22.06 billion — is one of the world’s largest pharmaceutical services companies, which is focused on providing drug distribution and related services to reduce health care costs and improve patient outcomes. It anticipates earnings to improve 11.3% over the next five years. Further, the company beat estimates in each of the trailing four quarters, the average surprise being 7.2%.
Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).
What’s Deterring the Stock?
AmerisourceBergen operates in a highly competitive pharmaceutical distribution and related health care services market. The company’s primary competitors include Cardinal Health, McKesson, and national generic distributors and regional distributors. Consequently, increased competition can impact the company’s business.
What’s Driving Growth?
Pharmaceutical Distribution serves healthcare providers in the pharmaceutical supply channel. AmerisourceBergen has been witnessing strong revenue growth in this unit in the last couple of quarters. Increasing volume and an expanding customer base have been driving the segment. Strong organic growth rates in the U.S. pharmaceutical market, enhanced patient access to medical care, improved economic conditions and population demographics are likely to continue benefiting the segment in the quarters ahead.
In fiscal fourth-quarter 2020, revenues at this segment totaled $47.29 billion, reflecting an improvement of 7.8% on a year-over-year basis courtesy of higher volume related to growth of some of its largest customers and continued strength in specialty product sales. Segmental operating income was $425.6 million, up 15.2% year over year. Increase in gross profit, exit of the PharMEDium compounding business and slight expense growth contributed to the upside.
AmerisourceBergen is expected to gain from generics growth in the long run. The company is well-positioned to help ensure products get to market as efficiently as possible. During third-quarter fiscal 2020, the company introduced two new offerings at its MWI Animal Health business, which have been developed to help veterinarians manage the financial impact of COVID-19.
The new offerings enable practices to offer flexible financing solutions for clients, thereby lowering the financial burden of both routine and emergency pet care. The offerings also help practices in achieving sustained revenue growth, long-term client engagement and improved patient outcomes.
Which Way are Estimates Headed?
For fiscal 2021, the Zacks Consensus Estimate for revenues is pegged at $200.78 billion, indicating an improvement of 5.7%. The same for adjusted earnings per share stands at $8.37, suggesting growth of 5.9%.
DENTSPLY has a projected long-term earnings growth rate of 7.4%.
Patterson Companies has an estimated long-term earnings growth rate of 9.6%.
IDEXX Laboratories has a projected long-term earnings growth rate of 15.8%.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.4% per year.
These 7 were selected because of their superior potential for immediate breakout.
Image: Bigstock
Here's Why You Should Retain AmerisourceBergen (ABC) Now
AmerisourceBergen Corporation is well poised for growth on the back of its robust pharmaceutical distribution business and new product offerings. Intense competition remains a concern.
The stock has gained 23.1%, compared with the industry’s growth of 17.5% in a year’s time. Meanwhile, the S&P 500 Index rallied 20.7% in the same time frame.
AmerisourceBergen — with a market capitalization of $22.06 billion — is one of the world’s largest pharmaceutical services companies, which is focused on providing drug distribution and related services to reduce health care costs and improve patient outcomes. It anticipates earnings to improve 11.3% over the next five years. Further, the company beat estimates in each of the trailing four quarters, the average surprise being 7.2%.
Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).
What’s Deterring the Stock?
AmerisourceBergen operates in a highly competitive pharmaceutical distribution and related health care services market. The company’s primary competitors include Cardinal Health, McKesson, and national generic distributors and regional distributors. Consequently, increased competition can impact the company’s business.
What’s Driving Growth?
Pharmaceutical Distribution serves healthcare providers in the pharmaceutical supply channel. AmerisourceBergen has been witnessing strong revenue growth in this unit in the last couple of quarters. Increasing volume and an expanding customer base have been driving the segment. Strong organic growth rates in the U.S. pharmaceutical market, enhanced patient access to medical care, improved economic conditions and population demographics are likely to continue benefiting the segment in the quarters ahead.
In fiscal fourth-quarter 2020, revenues at this segment totaled $47.29 billion, reflecting an improvement of 7.8% on a year-over-year basis courtesy of higher volume related to growth of some of its largest customers and continued strength in specialty product sales. Segmental operating income was $425.6 million, up 15.2% year over year. Increase in gross profit, exit of the PharMEDium compounding business and slight expense growth contributed to the upside.
AmerisourceBergen is expected to gain from generics growth in the long run. The company is well-positioned to help ensure products get to market as efficiently as possible. During third-quarter fiscal 2020, the company introduced two new offerings at its MWI Animal Health business, which have been developed to help veterinarians manage the financial impact of COVID-19.
The new offerings enable practices to offer flexible financing solutions for clients, thereby lowering the financial burden of both routine and emergency pet care. The offerings also help practices in achieving sustained revenue growth, long-term client engagement and improved patient outcomes.
Which Way are Estimates Headed?
For fiscal 2021, the Zacks Consensus Estimate for revenues is pegged at $200.78 billion, indicating an improvement of 5.7%. The same for adjusted earnings per share stands at $8.37, suggesting growth of 5.9%.
Stocks to Consider
Some better-ranked stocks from the broader medical space are DENTSPLY SIRONA Inc. (XRAY - Free Report) , Patterson Companies, Inc. (PDCO - Free Report) and IDEXX Laboratories, Inc. (IDXX - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DENTSPLY has a projected long-term earnings growth rate of 7.4%.
Patterson Companies has an estimated long-term earnings growth rate of 9.6%.
IDEXX Laboratories has a projected long-term earnings growth rate of 15.8%.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.4% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>