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AmerisourceBergen (ABC) Beats on Q3 Earnings, Revenues Lag

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AmerisourceBergen Corporation (ABC - Free Report) posted adjusted earnings of $1.43 per share in the third quarter of fiscal 2017, beating the Zacks Consensus Estimate of $1.37 and increasing 4.4% on a year-over-year basis. The upside was primarily driven by strong growth in its Consulting Services, MWI Animal Health and World Courier businesses.

Revenues improved almost 4.9% to $38.7 billion in the reported quarter. However, reported revenues were lower than the Zacks Consensus Estimate of $39.3 billion.

Revenue Segments

Pharmaceutical Distribution segment: In the reported quarter, revenues at the segment increased 4.7% to $37.0 billion. Within the segment, AmerisourceBergen Drug Corp. revenues were up 4.5%, primarily on the back of solid organic sales growth.

The AmerisourceBergen Specialty Group unit in the segment performed impressively during the quarter, with revenues rising 10.3% year over year. The increase can be attributed to strong oncology product sales and solid performance by the third-party logistics business.

Other segment: This segment includes AmerisourceBergen Consulting Services (ABCS), World Courier and MWI Veterinary Supply. Revenues at the segment came in at $1.7 billion, up 10.6% on a year-over-year basis.

Operating Performance

Operating expenses, as a percentage of revenues, in the third quarter were 2.35% compared with 1.57% in the year-ago quarter.

Operating income, as a percentage of revenue, contracted 99 basis points (bps) to 0.44% in the quarter under review.

As a percentage of revenues, gross profit declined 21 bps in the reported quarter on a year-over-year basis to 2.79%.

Guidance

AmerisourceBergen expects fiscal 2017 revenue growth in the range of approximately 5%, significantly lower than the previously provided band of 5.5% to 6.5%.

The company expects adjusted diluted earnings per share for fiscal 2017 in the band of $5.82 to $5.92, up from the previously provided $5.77 to $5.92.

The company expects brand drug inflation in the range of 7% to 9%.

Zacks Rank & Stocks to Consider

AmerisourceBergen has a Zacks Rank #4 (Sell).

Better-ranked medical stocks include Edwards Lifesciences Corporation (EW - Free Report) , Abiomed Inc. (ABMD - Free Report) and Fresenius Medical Care Corporation (FMS - Free Report) . Fresenius Medical Care and Edwards Lifesciences sport a Zacks Rank #1 (Strong Buy), while Abiomed has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Edwards Lifesciences has a long-term expected earnings growth rate of 15.2%. The stock has a one-year return of 1.5%.

Abiomed delivered a strong return of 23.4% over the last one year. The stock has a long-term expected earnings growth rate of 30.5%.

Fresenius Medical Care represents a return of 2.5% over the last one year. The company delivered a solid earnings surprise of 20.5% in the last reported quarter.

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