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AmerisourceBergen (ABC) Q2 Earnings Beat, Revenues Miss

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AmerisourceBergen Corporation (ABC - Free Report) reported second-quarter fiscal 2021 adjusted earnings per share (EPS) of $2.53 surpassing the Zacks Consensus Estimate of $2.51 by 0.8%. The bottom line also improved 5.4% year over year.

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

Revenue Details

Revenues increased 3.7% to $49.15 billion in the reported quarter. However, the top line missed the Zacks Consensus Estimate by 1.6%.

Segmental Analysis

Pharmaceutical Distribution Segment

Revenues at this segment totaled $47.10 billion, reflecting an improvement of 3.4% on a year-over-year basis on the back of increase in specialty product sales, including COVID-19 treatments.

Segmental operating income was $589 million, up 4.6% year over year. Higher sales of specialty products contributed to the upside.

Other Segment

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

Revenues at this segment were $2.09 billion, up 11.5% year over year. The upside was driven by growth across all three operating segments.

Operating income in the segment was $123.2 million in the quarter, up 13.8% 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 $1.51 billion, up 6.7% on a year-over-year basis. As a percentage of revenues, adjusted gross margin was 3.1% in the quarter, up 20 basis points (bps) a year-over-year basis.

The company reported adjusted operating income of $706.6 million, up 5.2% year over year. As a percentage of revenues, adjusted operating margin was 1.4% in the quarter, which expanded 2 bps from the year-ago quarter.

Fiscal 2021 Guidance Updated

AmerisourceBergen has updated its fiscal 2021 outlook, indicating sustained solid performance that comprises better-than-expected performance in its Global Commercialization Services & Animal Health unit and an incrementally higher estimated share count for the year.

Adjusted EPS is now estimated to be $8.45-$8.60 (up from the prior-guided range of $8.40-$8.60). The Zacks Consensus Estimate currently stands at $8.54.

The company estimates revenue growth in the high-single-digit percent range.

Adjusted operating income is now projected to grow in high-single-digit percent range.

Operating income at Pharmaceutical Distribution Services segment is now anticipated to improve in high-single-digit percent range.

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

Summing Up

AmerisourceBergen exited the fiscal second quarter on a mixed note, wherein earnings beat the consensus mark but revenues missed the same. The company continues to gain from its Pharmaceutical segment and World Courier business, which have been generating substantial profits for quite some time. Moreover, the company witnessed increase in gross profit in the quarter under review. Also, expansion in both gross and operating margins is a positive.

However, the company faces other headwinds like conversion of branded drugs and lower price generics. Cut-throat competition in the MedTech space also remains a concern.

Zacks Rank

Currently, AmerisourceBergen carries a Zacks Rank #3 (Hold).

Earnings of Other MedTech Majors at a Glance

Some better-ranked stocks in the broader medical space that have already announced their quarterly results are Illumina, Inc. (ILMN - Free Report) , Boston Scientific Corporation (BSX - Free Report) and HCA Healthcare, Inc. (HCA - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Illumina reported first-quarter 2021 adjusted EPS of $1.89, which surpassed the Zacks Consensus Estimate by 38.9%. First-quarter revenues of $1.09 billion outpaced the Zacks Consensus Estimate of $1.08 billion.

Boston Scientific reported first-quarter 2020 adjusted EPS of 37 cents, which beat the Zacks Consensus Estimate by 32.1%. First-quarter revenues of $2.75 billion outpaced the consensus mark by 5.3%.

HCA Healthcare reported first-quarter 2021 adjusted EPS of $4.14, surpassing the Zacks Consensus Estimate by 23.6%. Net revenues of $14 billion exceeded the Zacks Consensus Estimate by 2.2%.

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