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AmerisourceBergen (ABC) Down 1.8% Since Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for AmerisourceBergen Corporation (Holding Co) (ABC - Free Report) . Shares have lost about 1.8% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? 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 drivers.

AmerisourceBergen Beats on Q3 Earnings, Revenues Lag

AmerisourceBergen Corporation 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%.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter. While looking back an additional 30 days, we can see even more downward momentum.

VGM Scores

At this time, AmerisourceBergen's stock has a poor Growth Score of F, however its Momentum is doing a lot better with a C. However, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for value investors than momentum investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift.  Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.




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