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AmerisourceBergen (ABC) Q1 Earnings Lag Estimates, Revenues Beat

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AmerisourceBergen Corporation reported first-quarter fiscal 2022 adjusted earnings per share (EPS) of $2.58, which missed the Zacks Consensus Estimate of $2.59 by 0.4%. The bottom line, however, improved 18.3% year over year.

GAAP EPS in the quarter was $2.13 compared with the year-ago quarter’s figure of $1.81.

Revenue Details

Revenues increased 13.5% to $59.63 billion in the reported quarter. The top line beat the Zacks Consensus Estimate by 0.6%.

Segment Realignment Update

It is worth mentioning that AmerisourceBergen made a strategic evaluation of its reporting structure in order to represent its expanded international presence because of the June 2021 buyout of Alliance Healthcare. Consequently, starting from the first quarter of fiscal 2022, the company has realigned its reporting structure under two reportable segments — U.S. Healthcare Solutions and International Healthcare Solutions.

Segmental Analysis

U.S. Healthcare Solutions

Revenues at this segment totaled $52.98 billion, reflecting an increase of 2.7% on a year-over-year basis on the back of an increase in specialty product sales coupled with overall market growth and strength in MWI Animal Health business. Lower revenues from COVID-19 therapies partially offset the upside.

Segmental operating income was $569.1 million, up 0.6% year over year. Higher gross profit contributed to the upside. This improvement was largely offset by a rise in operating expenses.

International Healthcare Solutions

This segment includes Alliance Healthcare, World Courier, Innomar, Profarma and Profarma Specialty.

Revenues at this segment were $6.65 billion, up 604.2% year over year. The upside was mainly driven by the acquisition of Alliance Healthcare (June 2021).

Operating income in the segment was $180.1 million in the quarter, up 253.1% year over year primarily due to the buyout of Alliance Healthcare.

Margin Analysis

In the fiscal first quarter, AmerisourceBergen reported an adjusted gross profit of $2.02 billion, up 41.3% on a year-over-year basis. As a percentage of revenues, adjusted gross margin was 3.4% in the quarter, up 66 basis points (bps).

The company reported an adjusted operating income of $749.1 million, up 21.4% year over year. As a percentage of revenues, adjusted operating margin was 1.3% in the quarter, which expanded 9 bps from the year-ago quarter.

Financial Position

The company exited the quarter with cash and cash equivalents worth $3.17 billion, compared with $2.55 billion a quarter ago.

Net cash used in operating activities at the end of the fiscal first quarter totaled $863.4 million compared with $903.1 million in the prior-year quarter.

Dividend Update

During the quarter, AmerisourceBergen’s board of directors declared a quarterly dividend of 46 cents per share, payable Feb 28, 2022, to shareholders at the close of business on Feb 14, 2022.

Fiscal 2022 Guidance

AmerisourceBergen has updated its fiscal 2022 outlook, highlighting revised full-year expectations from COVID therapy distribution and higher interest expense.

Adjusted EPS is now estimated to be $10.60-$10.90 (up from the previously guided range of $10.50-$10.80). The Zacks Consensus Estimate currently stands at $10.69.

The company estimates revenue growth in the high-single-digit to low-double-digit percent range.
With respect to the U.S. Healthcare Solutions segment, revenues are expected in the band of $207 billion to $212 billion, representing growth of 2-5%. Revenues at the International Healthcare solutions business are projected to be $26 billion to $27 billion.

Adjusted operating income is projected to grow in the high-teens percent range (up from the previously guided mid-to high-teens percent range).

Operating income at the U.S. Healthcare Solutions segment is anticipated between $2.38 billion and $2.45 billion (up from $2.33 billion and $2.4 billion), reflecting growth of 5-9%.

For the International Healthcare solutions segment, the metric is estimated to grow in the range of $685 million to $715 million.

Adjusted free cash flow is estimated to be $2 billion to $2.5 billion.

Summing Up

AmerisourceBergen exited the fiscal first quarter on a mixed note, wherein earnings and missed the consensus mark, while earnings beat the same. The company witnessed robust segmental performance in the quarter under review. Expansion at both gross and operating margins is a positive.

Per management, AmerisourceBergen continues to play a crucial role as the distributor of antiviral and antibody therapies used to treat COVID-19, including new treatments authorized by the FDA. Apart from this, the company extended its pharmaceutical supply agreement with Express Scripts through 2026.

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

Zacks Rank

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

Key Picks

Some better-ranked stocks that are supposed to report earnings soon are Cerner Corporation , Baxter International Inc. (BAX - Free Report) and AMN Healthcare Services, Inc. (AMN - Free Report) .

The Zacks Consensus Estimate for Cerner’s fourth-quarter 2021 adjusted EPS is currently pegged at 88 cents. The consensus estimate for fourth-quarter 2021 revenues stands at $1.49 billion. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cerner has an estimated long-term growth rate of 12.8%. CERN’s earnings yield of 4% compares favorably with the industry’s negative yield.

Baxter currently has a Zacks Rank #1. The Zacks Consensus Estimate for its fourth-quarter 2021 adjusted EPS is currently pegged at $1.03. The consensus estimate for fourth-quarter revenues stands at $3.35 billion.

Baxter has an estimated long-term growth rate of 9.5%. BAX’s earnings yield of 4.9% compares favorably with the industry’s negative yield.

AMN Healthcare currently sports a Zacks Rank #1. The Zacks Consensus Estimate for its fourth-quarter 2021 adjusted EPS is currently pegged at $2.58. The consensus estimate for its revenues stands at $1.28 billion.

AMN Healthcare has an estimated long-term growth rate of 16.2%. AMN’s earnings yield of 6.7% compares favorably with the industry’s 1.1%.

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