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Why Is AmerisourceBergen (ABC) Up 2% Since Last Earnings Report?

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It has been about a month since the last earnings report for AmerisourceBergen . Shares have added about 2% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is AmerisourceBergen due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

AmerisourceBergen Beats on Q2 Earnings, Ups '23 EPS View 

 AmerisourceBergen reported second-quarter fiscal 2023 adjusted earnings per share (EPS) of $3.50, which beat the Zacks Consensus Estimate of $3.29 by 6.4%. The bottom line improved 8.7% year over year.

GAAP EPS was $2.13, down 17.8% from that reported in the year-ago period.

Revenue Details

Revenues totaled $63.46 billion, up 9.9% year over year. The top line beat the Zacks Consensus Estimate by 4.4%.

Segmental Analysis

U.S. Healthcare Solutions

Revenues at this segment totaled $56.7 billion, up 11.3% on a year-over-year basis. This improvement was due to overall market growth and an increased specialty product sales. Lower revenues from commercial COVID-19 treatments partially offset the upside.

Segmental operating income came in at $756.1 million, up 3.6% year over year. Higher gross profit (which included fees earned from the distribution of government-owned COVID-19 treatments and gross profit on sales to specialty physician practices) contributed to the upside, largely offset by inflationary impacts on certain operating expenses.

International Healthcare Solutions

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

Revenues totaled $6.8 billion, down 0.2% year over year.

Operating income came in at $176 million, down 5.9% from that recorded in the year-ago quarter.

The decline in revenues and income was due to divestiture of the Brazil specialty business in June 2022 and unfavorable foreign currency exchange rate. Revenues and operating income improved 11.9% and 7.3%, respectively, at constant currency (cc).

Margin Analysis

AmerisourceBergen reported an adjusted gross profit of $2.4 billion, up 6.2% on a year-over-year basis. As a percentage of revenues, the adjusted gross margin was 3.7%, down 13 basis points (bps) year over year.

The company recorded an adjusted operating income of $932.1 million, up 1.7% year over year. The metric was up 4.4% at cc. As a percentage of revenues, the adjusted operating margin was 1.5%, which contracted 12 bps from the year-ago quarter.

Financial Position

ABC exited the fiscal second quarter with cash and cash equivalents worth $1.54 billion compared with $1.69 billion in the first-quarter fiscal 2023.

Cumulative net cash used in operating activities totaled $1.34 billion compared with $1.13 billion in the prior-year period.

Dividend Update

During the quarter, AmerisourceBergen's board of directors declared a quarterly dividend of 48.5 cents per share, payable on May 30, to shareholders of record at the close of business on May 12, 2023.

Fiscal 2023 Guidance

The company raised its 2023 outlook for earnings to reflect stronger core growth in its U.S. Healthcare Solutions segment.

Adjusted EPS is now estimated in the range of $11.70-$11.95, indicating growth of 6-8% from the previous year. The Zacks Consensus Estimate is currently pegged at $11.63 per share. Previously, the company expected adjusted EPS in the band of $11.50-$11.75.

Revenue growth is now projected at 6-8% compared with the previous guidance of 5-7%. The top line at the U.S. Healthcare Solutions segment is expected to grow 7-8% compared with the previous guided range of 6-8%. Revenues at the International Healthcare solutions business are projected to be flat to down 3% versus a decline of 1-5%.

Adjusted EPS is estimated to improve 8-10% at cc, up from the previous guidance of 6-9%. Excluding contributions related to COVID-19 and currency fluctuations, the figure is projected to increase 13-15% compared with the previous expectation of 11-13%.

Adjusted operating income is expected to gain 2-4% versus 0-3% previously. Operating income at the U.S. Healthcare Solutions segment is now anticipated to grow 3-5% compared with previous expectation of 1-4%. For the International Healthcare Solutions segment, the company's guidance for the metric has been unchanged at a 3% decline to 1% growth.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

At this time, AmerisourceBergen has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, AmerisourceBergen has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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