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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 prudent acquisitions. Intense competition remains a concern.
The stock has gained 17.6%, compared with the industry’s growth of 9.7% on a year-to-date basis. Meanwhile, the S&P 500 Index rallied 16.4% in the same time frame.
AmerisourceBergen — with a market capitalization of $23.86 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 11.4% over the next five years. Further, the company beat estimates in each of the trailing four quarters, the average surprise being 7.8%.
Image Source: Zacks Investment Research
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, improving patient access to medical care, enhanced economic conditions and population demographics are likely to continue benefiting the segment in the quarters ahead.
In fiscal second-quarter 2021, revenues in the segment amounted to $47.10 billion, up 3.4% on a year-over-year basis. The upside can be attributed to 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.
AmerisourceBergen has been actively pursuing acquisitions to strengthen its core areas. In January 2021, the company inked a strategic deal with Walgreens Boots Alliance to acquire the majority of the latter’s Alliance Healthcare business for around $6.5 billion, which comprises $6.275 billion in cash and 2 million shares of AmerisourceBergen common stock.
The buyout will provide a boost to AmerisourceBergen’s platform and help it in delivering sustained growth throughout pharmaceutical distribution and manufacturer services. The deal will offer expanded scale and added services, which will enable the combined business to better support pharmaceutical innovation through a global presence of broad leadership and local expertise.
Estimates Trend
AmerisourceBergen has been witnessing an upward estimate revision trend for fiscal 2021. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved north by 3.6% to $8.82.
The Zacks Consensus Estimate for fiscal third-quarter 2021 revenues is pegged at $51.47 billion, suggesting growth of 13.4% from the year-ago reported number.
Veeva Systems’ long-term earnings growth rate is estimated at 15.8%.
Envista Holdings’ long-term earnings growth rate is estimated at 26.4%.
Baxter International’s long-term earnings growth rate is projected at 9.3%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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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 prudent acquisitions. Intense competition remains a concern.
The stock has gained 17.6%, compared with the industry’s growth of 9.7% on a year-to-date basis. Meanwhile, the S&P 500 Index rallied 16.4% in the same time frame.
AmerisourceBergen — with a market capitalization of $23.86 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 11.4% over the next five years. Further, the company beat estimates in each of the trailing four quarters, the average surprise being 7.8%.
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, improving patient access to medical care, enhanced economic conditions and population demographics are likely to continue benefiting the segment in the quarters ahead.
In fiscal second-quarter 2021, revenues in the segment amounted to $47.10 billion, up 3.4% on a year-over-year basis. The upside can be attributed to 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.
AmerisourceBergen has been actively pursuing acquisitions to strengthen its core areas. In January 2021, the company inked a strategic deal with Walgreens Boots Alliance to acquire the majority of the latter’s Alliance Healthcare business for around $6.5 billion, which comprises $6.275 billion in cash and 2 million shares of AmerisourceBergen common stock.
The buyout will provide a boost to AmerisourceBergen’s platform and help it in delivering sustained growth throughout pharmaceutical distribution and manufacturer services. The deal will offer expanded scale and added services, which will enable the combined business to better support pharmaceutical innovation through a global presence of broad leadership and local expertise.
Estimates Trend
AmerisourceBergen has been witnessing an upward estimate revision trend for fiscal 2021. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved north by 3.6% to $8.82.
The Zacks Consensus Estimate for fiscal third-quarter 2021 revenues is pegged at $51.47 billion, suggesting growth of 13.4% from the year-ago reported number.
Stocks to Consider
Some better-ranked stocks from the broader medical space are Veeva Systems Inc. (VEEV - Free Report) , Envista Holdings Corporation (NVST - Free Report) and Baxter International Inc. (BAX - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Veeva Systems’ long-term earnings growth rate is estimated at 15.8%.
Envista Holdings’ long-term earnings growth rate is estimated at 26.4%.
Baxter International’s long-term earnings growth rate is projected at 9.3%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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