AmerisourceBergen Corporation ( ABC Quick Quote ABC - Free Report) reached a new 52-week high of $117.64 on Mar 25, before closing the session marginally lower at $117.34. The stock has rallied 5.3% since its first-quarter fiscal 2021 earnings announcement on Feb 4.
The company is witnessing an upward trend in its stock price, prompted by its robust fiscal 2021 outlook despite the pandemic-led business disruptions. Potential in the company’s World Courier business and focus on the Pharmaceutical Distribution unit also boosted market sentiments. However, a stiff competitive landscape and rising operating expenses are concerning.
Let's delve deeper.
Encouraging Q1 Performance
AmerisourceBergen’s impressive performance in first-quarter fiscal 2021 buoys optimism. The company witnessed increase in gross profit in the fiscal first quarter with a solid organic revenue growth. Also, expansion in both gross and operating margins is a positive. A strong fiscal 2021 outlook instills optimism in the stock.
Other Growth Drivers Potential Upsides of World Courier Business: Investors are upbeat about AmerisourceBergen’s sustained strong growth in World Courier business. The business delivered robust results in the fiscal first quarter of 2021 as well. During the fiscal first quarter, the business was able to provide more services and navigate the complexity of moving materials worldwide despite the challenging environment, while boosting innovation with clinical trial in at-home settings. Pharmaceutical Distribution in Focus: Investors are optimistic about Pharmaceutical Distribution arm’s strong growth over the past few quarters. The segment rides on increasing volume and an expanding customer base. Strong organic growth rates in the U.S. pharmaceutical market, improving patient access to medical care, improved economic conditions and population demographics should benefit the segment in the quarters to come. In fiscal first-quarter 2021, the segment registered a robust revenue growth on the back of higher volume related to growth of some of its largest customers and continued strength in specialty product sales. Downsides Rising Operating Expenses: AmerisourceBergen has been witnessing an increase in its operating expenses for the past few quarters, and the fiscal first quarter is not an exception. Rise in expenses can hurt the company's margin expansion capabilities. Competitive Landscape: AmerisourceBergen operates in a highly competitive pharmaceutical distribution and related health care services market which includes companies like Cardinal Health, Inc. ( CAH Quick Quote CAH - Free Report) , along with national generic distributors and regional distributors. The generic industry is facing consolidation of customers and manufacturers, globalization, and increasing quality and regulatory challenges. The company faces additional competition from manufacturers, chain drugstores, specialty distributors, and packaging and health care technology companies. Increased competition can impact the company’s business. Zacks Rank & Key Picks
Currently, AmerisourceBergen carries a Zacks Rank #3 (Hold).
Some other better-ranked stocks from the broader medical space are
Hologic, Inc. ( HOLX Quick Quote HOLX - Free Report) and IDEXX Laboratories, Inc. ( IDXX Quick Quote IDXX - Free Report) .
Hologic’s long-term earnings growth rate is estimated at 15.4%. The company presently carries a Zacks Rank #2 (Buy). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
IDEXX’s long-term earnings growth rate is estimated at 15.8%. It currently carries a Zacks Rank #2.
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