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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 robust U.S. Healthcare Solutions business and product launches. However, intense competition is a concern.
Shares of this currently Zacks Rank #3 (Hold) company have risen 8.8% year to date compared with the industry’s 14.6% growth. The S&P 500 Index has increased 15.6% in the same time frame.
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. It has a market capitalization of $36.29 billion.
Image Source: Zacks Investment Research
The company’s bottom line is anticipated to improve 8.4% over the next five years. Its earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 3.45%.
What’s Driving Growth?
In fiscal 2022, ABC realigned its reporting structure under two segments — U.S. Healthcare Solutions and International Healthcare Solutions.
The first segment consists of the legacy Pharmaceutical Distribution Services (excluding Proforma), MWI Animal Health, Xcenda, Lash Group and ICS 3PL. It 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 third quarter of 2023, revenues at U.S. Healthcare Solutions totaled $59.9 billion, up 12.2% year over year. This improvement was due to higher specialty product sales and overall market growth.
However, this upside was partially offset by lower revenues from commercial COVID-19 treatments. Segmental operating income amounted to $635.2 million, up 9.5% 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.
Revenues at the U.S. Healthcare Solutions segment are expected to grow at least 9% in fiscal 2023. Operating income is anticipated to increase 4-5%.
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 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 in January to support manufacturer partners in the pharmaceutical development and commercialization journey should bring in additional revenues during the soon-to-be reported quarter.
Adjusted earnings per share for fiscal 2023 is estimated between $11.85 and $11.95, implying a 7-8% increase from the previous year’s level. ABC estimates revenue growth of at least 8% for the same time frame.
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, global competitors and regulatory challenges.
The company encounters additional competition from manufacturers, chain drugstores, specialty distributors, and packaging and healthcare technology companies. Increased competition is likely to affect its business.
Estimate Trend
ABC has been witnessing a positive estimate revision trend for fiscal 2023. In the past 30 days, the Zacks Consensus Estimate for earnings has increased from $11.84 per share to $11.92.
The consensus mark for fourth-quarter fiscal 2023 revenues is pegged at $66.24 billion, indicating a 8.3% improvement from the year-ago quarter’s reported actual. The bottom-line estimate is pinned at $2.79, implying year-over-year growth of 7.3%.
Some better-ranked stocks in the broader medical space are Patterson Companies, Inc. (PDCO - Free Report) , HealthEquity, Inc. (HQY - Free Report) and McKesson Corporation (MCK - Free Report) .
PDCO’s earnings surpassed estimates in three of the trailing four quarters and missed once, delivering an average surprise of 4.5%. The company’s shares have risen 21% year to date compared with the industry’s 13.7% growth.
HealthEquity, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 22%. HQY’s earnings surpassed estimates in three of the trailing four quarters and missed once, delivering an average surprise of 9.1%.
The company’s shares have rallied 8.9% year to date against the industry’s 8.6% decline.
McKesson, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 10.7%. MCK’s earnings surpassed estimates in three of the trailing four quarters and missed once, delivering an average surprise of 8.1%.
The stock has gained 12.3% year to date compared with the industry’s 13.6% growth.
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Reasons to Retain AmerisourceBergen (ABC) in Your Portfolio
AmerisourceBergen Corporation is well poised for growth on the back of robust U.S. Healthcare Solutions business and product launches. However, intense competition is a concern.
Shares of this currently Zacks Rank #3 (Hold) company have risen 8.8% year to date compared with the industry’s 14.6% growth. The S&P 500 Index has increased 15.6% in the same time frame.
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. It has a market capitalization of $36.29 billion.
Image Source: Zacks Investment Research
The company’s bottom line is anticipated to improve 8.4% over the next five years. Its earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 3.45%.
What’s Driving Growth?
In fiscal 2022, ABC realigned its reporting structure under two segments — U.S. Healthcare Solutions and International Healthcare Solutions.
The first segment consists of the legacy Pharmaceutical Distribution Services (excluding Proforma), MWI Animal Health, Xcenda, Lash Group and ICS 3PL. It 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 third quarter of 2023, revenues at U.S. Healthcare Solutions totaled $59.9 billion, up 12.2% year over year. This improvement was due to higher specialty product sales and overall market growth.
However, this upside was partially offset by lower revenues from commercial COVID-19 treatments. Segmental operating income amounted to $635.2 million, up 9.5% 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.
Revenues at the U.S. Healthcare Solutions segment are expected to grow at least 9% in fiscal 2023. Operating income is anticipated to increase 4-5%.
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 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 in January to support manufacturer partners in the pharmaceutical development and commercialization journey should bring in additional revenues during the soon-to-be reported quarter.
Adjusted earnings per share for fiscal 2023 is estimated between $11.85 and $11.95, implying a 7-8% increase from the previous year’s level. ABC estimates revenue growth of at least 8% for the same time frame.
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, global competitors and regulatory challenges.
The company encounters additional competition from manufacturers, chain drugstores, specialty distributors, and packaging and healthcare technology companies. Increased competition is likely to affect its business.
Estimate Trend
ABC has been witnessing a positive estimate revision trend for fiscal 2023. In the past 30 days, the Zacks Consensus Estimate for earnings has increased from $11.84 per share to $11.92.
The consensus mark for fourth-quarter fiscal 2023 revenues is pegged at $66.24 billion, indicating a 8.3% improvement from the year-ago quarter’s reported actual. The bottom-line estimate is pinned at $2.79, implying year-over-year growth of 7.3%.
AmerisourceBergen Corporation Price
AmerisourceBergen Corporation price | AmerisourceBergen Corporation Quote
Stocks to Consider
Some better-ranked stocks in the broader medical space are Patterson Companies, Inc. (PDCO - Free Report) , HealthEquity, Inc. (HQY - Free Report) and McKesson Corporation (MCK - Free Report) .
Patterson Companies, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 9.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PDCO’s earnings surpassed estimates in three of the trailing four quarters and missed once, delivering an average surprise of 4.5%. The company’s shares have risen 21% year to date compared with the industry’s 13.7% growth.
HealthEquity, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 22%. HQY’s earnings surpassed estimates in three of the trailing four quarters and missed once, delivering an average surprise of 9.1%.
The company’s shares have rallied 8.9% year to date against the industry’s 8.6% decline.
McKesson, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 10.7%. MCK’s earnings surpassed estimates in three of the trailing four quarters and missed once, delivering an average surprise of 8.1%.
The stock has gained 12.3% year to date compared with the industry’s 13.6% growth.