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AmerisourceBergen to Take Over H. D. Smith for $815 Million

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AmerisourceBergen Corporation signed a definitive agreement to acquire H. D. Smith for $815 million in cash. H. D. Smith is a privately-held national wholesaler offering a complete line of healthcare products and solutions. 

AmerisourceBergen expects this deal to contribute nominally to adjusted diluted earnings per share (EPS) in fiscal 2018 and to achieve full run-rate synergies in fiscal 2020. The deal is expected to close in early calendar year 2018, on approval from regulators.

This acquisition, post closure, is expected to expand and improve AmerisourceBergen’s Pharmaceutical Distribution segment. In the last reported fourth quarter, revenues at the segment improved 3.9% on a year-over-year basis. In May, the company signed a new five-year agreement to supply pharmaceuticals to Express Scripts Holding Company.

 

 

Taking the buyout into consideration, the company expects revenue growth in fiscal 2018 in the range of 8-11% and adjusted operating income growth in the band of 4-7%. AmerisourceBergen has reiterated the rest of the fiscal 2018 financial guidance.

Market research firm, Evaluate Pharma estimates that the pharma industry will see a CAGR of 6.3% by 2022. Looking at the bountiful opportunities in this niche space, we believe the company’s latest development is strategic.

AmerisourceBergen’s shares have declined 3.7% in the past month, comparing unfavorably with thebroader industry's fall of only 0.4%.

Estimate Revision Trend

The estimate revision trend has been favorable for the company. For the current year, four estimates moved north compared with one movement in the opposite direction over the last month. As a result, the Zacks Consensus Estimate for the full year has risen to $6.04 per share from $6.02.

Zacks Rank & Key Picks

AmerisourceBergen carries a Zacks Rank #3 (Hold).

A few better-ranked medical stocks are PetMed Express, Inc. (PETS - Free Report) , Align Technology, Inc. (ALGN - Free Report) and Myriad Genetics, Inc. (MYGN - Free Report) . Notably, PetMed, Align Technology and Myriad Genetics sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PetMed has a long-term expected earnings growth rate of 10%. The stock has rallied roughly 79.4% in a year.

Align Technology has a long-term expected earnings growth rate of 28.9%. The stock has gained 168.4% over a year.

Myriad Genetics has a long-term expected earnings growth rate of 15%. The stock has gained 91.6% in a year.

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