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Why Is AmerisourceBergen (ABC) Down 6.3% Since Last Earnings Report?

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A month has gone by since the last earnings report for AmerisourceBergen (ABC - Free Report) . Shares have lost about 6.3% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.

AmerisourceBergen Q1 Earnings & Revenues Beat Estimates

AmerisourceBergen Corporation reported first-quarter fiscal 2021 adjusted earnings per share of $2.18 surpassing the Zacks Consensus Estimate of $1.94 by 12.4%. The bottom line also improved 23.9% year over year.

The better-than-expected bottom-line performance can be attributed to higher adjusted operating income.

Revenue Details

Revenues increased 9.7% to $52.52 billion in the reported quarter. Further, the top line beat the Zacks Consensus Estimate by 3.8%.

Segmental Analysis

Pharmaceutical Distribution Segment

Revenues at this segment totaled $50.49 billion, reflecting an increase of 9.7% on a year-over-year basis on the back of higher volume related to growth of some of its largest customers and continued strength in specialty product sales.

Segmental operating income was $496.1 million, up 26.6% year over year. Increase in gross profit resulting from revenue growth contributed to the upside.

Other Segment

This segment includes AmerisourceBergen Consulting Services (ABCS), World Courier and MWI Veterinary Supply.

Revenues at this segment were $2.05 billion, up 11.1% year over year. The upside was driven by growth across all three operating segments.

Operating income in the segment was $121.6 million in the quarter, up 16.4% year over year primarily due to growth in World Courier and MWI.

Margin Analysis

In the quarter under review, AmerisourceBergen reported adjusted gross profit of $1.43 billion, up 14.8% on a year-over-year basis. As a percentage of revenues, adjusted gross margin was 2.7% in the quarter, up 10 basis points (bps) a year-over-year basis.

The company reported adjusted operating income of $616.9 million, up 24.6% year over year. As a percentage of revenues, adjusted operating margin was 1.2% in the quarter, which expanded 20 bps from the year-ago quarter.

Fiscal 2021 Guidance Updated

AmerisourceBergen has updated its fiscal 2021 outlook, indicating sustained solid performance and solid execution. It is important to note here that the outlook does not take into account any contribution from the Alliance Healthcare buyout or any incremental growth resulting from the expanded U.S. partnership announced in January 2021.

Adjusted EPS is now estimated to be $8.40-$8.60 (up from the prior-guided range of $8.25-$8.50). The Zacks Consensus Estimate currently stands at $8.37.

The company estimates revenue growth in the high-single-digit percent range (up from the prior mid-single-digit percent range).

Adjusted operating income is now projected to grow in high-single-digit percent range (up from the prior mid-single-digit percent range).

Operating income at Pharmaceutical Distribution Services segment is now anticipated to improve in high-single-digit percent range (up from the prior mid-single-digit percent range).

For the Other segment, the metric is estimated to grow in the mid-to-high single digit percent range (up from the previous mid-single-digit percent range).

Adjusted free cash flow is estimated to be around $1.5 billion.

The company anticipates adjusted effective tax rate to be 21-22%.

Adjusted operating expenses is projected to increase in the mid-to-high-single digit percent range (widened from the previous mid-single-digit percent range).

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

At this time, AmerisourceBergen has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, AmerisourceBergen has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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