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Reasons to Retain AmerisourceBergen (ABC) in Your Portfolio
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AmerisourceBergen Corporation is well-poised for growth on the back of its robust U.S. Healthcare Solutions business and product launches. Intense competition, though, remains a concern.
Shares of this currently Zacks Rank #3 (Hold) player have gained 27.4% against the industry’s decline of 12.3% so far this year. The S&P 500 Index has fallen 20% in the same time frame.
With a market capitalization of $34.82 billion, AmerisourceBergen is one of the world’s largest pharmaceutical services companies, focused on providing drug distribution and related services to reduce healthcare costs and improve patient outcomes. The company’s earnings are anticipated to improve 8.2% over the next five years. It beat on earnings in three of the trailing four quarters and missed the mark once, the average surprise being 2.51%.
Image Source: Zacks Investment Research
What’s Driving Growth?
AmerisourceBergen made a strategic evaluation of its reporting structure to represent its expanded international presence, following the June 2021 buyout of Alliance Healthcare. As a result, starting the first quarter of fiscal 2022, ABC realigned its reporting structure under two reportable segments, namely U.S. Healthcare Solutions and International Healthcare Solutions.
Following the segment realignment, U.S. Healthcare Solutions consists of the legacy Pharmaceutical Distribution Services reportable segment (excluding Proforma), MWI Animal Health, Xcenda, Lash Group and ICS 3PL. The segment benefits from increasing volume and an expanding customer base.
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 favor the segment in the coming quarters.
In the fiscal fourth quarter of 2022, revenues at this segment totaled $54.8 billion, reflecting a rise of 4.7% on a year-over-year basis on the back of higher specialty product sales and overall market growth. However, lower revenues from commercial COVID-19 treatments partially offset this upside. Segmental operating income was $578.4 million, up 14% year over year.
Higher gross profit (which included fees earned from the distribution of government-owned COVID-19 treatments and a gross profit on sales from specialty physician practices) contributed to the upside. With respect to the U.S. Healthcare Solutions segment, revenues are expected to grow 6-8%. Operating income at the segment is anticipated to grow 2-4%.
In September, AmerisourceBergen signed a definitive agreement to acquire Germany-based PharmaLex Holding GmbH for €1.28 billion ($1.3 billion) in cash. PharmaLex is a leading provider of specialized services for the life sciences industry, owned by funds advised by AUCTUS Capital Partners AG. It has a global reach, with a significant footprint in Europe and the United States and a growing presence in other parts of the world. The acquisition of this Germany-based company will enhance ABC’s global portfolio of solutions to support manufacturer partners across the pharmaceutical development and commercialization journey.
In January, ABC collaborated with TrakCel, the leading innovator of cellular orchestration solutions, to launch an integrated technology platform for accelerating patient access to prescribed cell and gene therapies and providing complete visibility throughout the treatment process.
The acquisition of Alliance Healthcare strongly drove AmerisourceBergen’s international segment revenues in fiscal 2022.
Adjusted EPS is estimated to be $11.30-$11.60 for fiscal 2023, implying 2-5% growth from the fiscal 2022-level. ABC estimates revenue growth of 5-7% for fiscal 2023.
What’s Hurting the Stock?
AmerisourceBergen operates in a highly competitive pharmaceutical distribution and related healthcare services market. The generic industry is facing consolidation of customers and manufacturers, globalization and regulatory challenges. ABC encounters additional competition from manufacturers, chain drugstores, specialty distributors, and packaging and healthcare technology companies. Increased competition will affect its business.
AmerisourceBergen has been witnessing an upward estimate revision trend for fiscal 2023. In the past 60 days, the Zacks Consensus Estimate for earnings has moved north to $11.48 from $11.47.
The Zacks Consensus Estimate for first-quarter fiscal 2023 revenues is pegged at $61.44 billion, suggesting growth of 3% from the year-ago fiscal quarter’s reported number. The earnings estimate of $2.62 per share for the same time-period suggests a rise of 1.6% year over year.
The Zacks Consensus Estimate for Elevance Health’s earnings per share has risen from $28.97 to $29.02 for 2022 and from $32.58 to $32.63 for 2023 in the past 60 days. ELV has rallied 10.2% so far this year. Elevance Health delivered an earnings surprise of 4.11%, on average, in the last four quarters.
Estimates for Merit Medical Systems have improved from earnings of $2.47 to $2.57 for 2022 and $2.77 to $2.82 for 2023 in the past 60 days. MMSI stock has risen 13.1% so far this year. Merit Medical Systems delivered an earnings surprise of 25.35%, on average, in the last four quarters.
Estimates for HealthEquity’s earnings per share have increased from $1.28 to $1.29 for fiscal 2023 and from $1.76 to $1.79 for fiscal 2024 in the past 60 days. HQY has rallied 39.6% so far this year. HealthEquity’s earnings are anticipated to improve 26.3% over the next five years.
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Reasons to Retain AmerisourceBergen (ABC) in Your Portfolio
AmerisourceBergen Corporation is well-poised for growth on the back of its robust U.S. Healthcare Solutions business and product launches. Intense competition, though, remains a concern.
Shares of this currently Zacks Rank #3 (Hold) player have gained 27.4% against the industry’s decline of 12.3% so far this year. The S&P 500 Index has fallen 20% in the same time frame.
With a market capitalization of $34.82 billion, AmerisourceBergen is one of the world’s largest pharmaceutical services companies, focused on providing drug distribution and related services to reduce healthcare costs and improve patient outcomes. The company’s earnings are anticipated to improve 8.2% over the next five years. It beat on earnings in three of the trailing four quarters and missed the mark once, the average surprise being 2.51%.
Image Source: Zacks Investment Research
What’s Driving Growth?
AmerisourceBergen made a strategic evaluation of its reporting structure to represent its expanded international presence, following the June 2021 buyout of Alliance Healthcare. As a result, starting the first quarter of fiscal 2022, ABC realigned its reporting structure under two reportable segments, namely U.S. Healthcare Solutions and International Healthcare Solutions.
Following the segment realignment, U.S. Healthcare Solutions consists of the legacy Pharmaceutical Distribution Services reportable segment (excluding Proforma), MWI Animal Health, Xcenda, Lash Group and ICS 3PL. The segment benefits from increasing volume and an expanding customer base.
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 favor the segment in the coming quarters.
In the fiscal fourth quarter of 2022, revenues at this segment totaled $54.8 billion, reflecting a rise of 4.7% on a year-over-year basis on the back of higher specialty product sales and overall market growth. However, lower revenues from commercial COVID-19 treatments partially offset this upside. Segmental operating income was $578.4 million, up 14% year over year.
Higher gross profit (which included fees earned from the distribution of government-owned COVID-19 treatments and a gross profit on sales from specialty physician practices) contributed to the upside. With respect to the U.S. Healthcare Solutions segment, revenues are expected to grow 6-8%. Operating income at the segment is anticipated to grow 2-4%.
In September, AmerisourceBergen signed a definitive agreement to acquire Germany-based PharmaLex Holding GmbH for €1.28 billion ($1.3 billion) in cash. PharmaLex is a leading provider of specialized services for the life sciences industry, owned by funds advised by AUCTUS Capital Partners AG. It has a global reach, with a significant footprint in Europe and the United States and a growing presence in other parts of the world. The acquisition of this Germany-based company will enhance ABC’s global portfolio of solutions to support manufacturer partners across the pharmaceutical development and commercialization journey.
In January, ABC collaborated with TrakCel, the leading innovator of cellular orchestration solutions, to launch an integrated technology platform for accelerating patient access to prescribed cell and gene therapies and providing complete visibility throughout the treatment process.
The acquisition of Alliance Healthcare strongly drove AmerisourceBergen’s international segment revenues in fiscal 2022.
Adjusted EPS is estimated to be $11.30-$11.60 for fiscal 2023, implying 2-5% growth from the fiscal 2022-level. ABC estimates revenue growth of 5-7% for fiscal 2023.
What’s Hurting the Stock?
AmerisourceBergen operates in a highly competitive pharmaceutical distribution and related healthcare services market. The generic industry is facing consolidation of customers and manufacturers, globalization and regulatory challenges. ABC encounters additional competition from manufacturers, chain drugstores, specialty distributors, and packaging and healthcare technology companies. Increased competition will affect its business.
AmerisourceBergen Corporation Price
AmerisourceBergen Corporation price | AmerisourceBergen Corporation Quote
Estimate Trend
AmerisourceBergen has been witnessing an upward estimate revision trend for fiscal 2023. In the past 60 days, the Zacks Consensus Estimate for earnings has moved north to $11.48 from $11.47.
The Zacks Consensus Estimate for first-quarter fiscal 2023 revenues is pegged at $61.44 billion, suggesting growth of 3% from the year-ago fiscal quarter’s reported number. The earnings estimate of $2.62 per share for the same time-period suggests a rise of 1.6% year over year.
Stocks to Consider
Some better-ranked stocks from the broader medical space are Elevance Health (ELV - Free Report) , Merit Medical Systems (MMSI - Free Report) and HealthEquity (HQY - Free Report) , each carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Elevance Health’s earnings per share has risen from $28.97 to $29.02 for 2022 and from $32.58 to $32.63 for 2023 in the past 60 days. ELV has rallied 10.2% so far this year. Elevance Health delivered an earnings surprise of 4.11%, on average, in the last four quarters.
Estimates for Merit Medical Systems have improved from earnings of $2.47 to $2.57 for 2022 and $2.77 to $2.82 for 2023 in the past 60 days. MMSI stock has risen 13.1% so far this year. Merit Medical Systems delivered an earnings surprise of 25.35%, on average, in the last four quarters.
Estimates for HealthEquity’s earnings per share have increased from $1.28 to $1.29 for fiscal 2023 and from $1.76 to $1.79 for fiscal 2024 in the past 60 days. HQY has rallied 39.6% so far this year. HealthEquity’s earnings are anticipated to improve 26.3% over the next five years.