With a market capitalization of approximately $20.26 billion, AmerisourceBergen Corporation (ABC - Free Report) has been benefiting from consistent solid organic revenue growth, World Courier Business, H.D. Smith acquisition and deal with Walgreens. A temporary PharMEDium slowdown, declining dollar, generic inflation, cutthroat competition in the niche space and lower-than-expected contribution from generic launches are denting growth.
For fiscal 2018, AmerisourceBergen expects revenue growth in the range of 8-11% on a year-over-year basis. Notably, the Zacks Consensus Estimate for revenues is currently pegged at $167.94 billion, reflecting an increase of 9.7% year over year.
The company expects adjusted earnings per share in the range of $6.45-$6.65 for fiscal 2018. Notably, the Zacks Consensus Estimate for earnings is currently pegged at $6.46 per share, which falls within the guidance.
However, the fiscal 2018 earnings estimates declined 0.3% in the last two months. Buoyed by the above mixed trends, the stock has a Zacks Rank #3 (Hold).
AmerisourceBergen Corporation Price and Consensus
So, here we take a quick look at the major factors that have been plaguing AmerisourceBergen, and also the brighter prospects that indicates of a near-term recovery.
Factors Plaguing AmerisourceBergen
AmerisourceBergen has recently received a grand jury subpoena from the U.S. Attorney's Office for the Western District of Tennessee for documents about the testing of a certain type of syringe made at its PharMEDium lab in Memphis. Memphis is the company’s largest highly automated production facility.
Consequently, AmerisorceBergen suspended operations and recalled all products from there that had yet to expire. Recently, the FDA also visited this facility for the same reason. Sluggishness in this unit is likely to hamper the company’s specialty distribution segment over the long haul.
In the second quarter of fiscal 2018, the segment's results were negatively impacted by PharMEDium, with the company witnessing lower-than-expected revenues and profit contribution. Per management, contribution to adjusted EBIT and EPS in fiscal 2018 will be lower than anticipated due to the time and certain ongoing incremental expenses required to perform remedial measures,.
Why Should You Hold?
Despite adversities in PharMEDium, AmerisourceBergen’s World Courier unit is likely to be the key driver of revenues. The unit is a global leader in specialty logistics that designs and executes world-class logistics processes.
Per management, World Courier’s position as the leader in global specialty logistics services propelled volume growth and overall performance for the company in the last couple of quarters as well.
Recently, the company announced the designation of its flagship World Courier unit as the first logistics company to obtain global Good Distribution Practices (GDP) certification against three major standards.
The business posted impressive results in the second quarter of fiscal 2018. At the end of the quarter, World Courier’s company-owned offices were spread across more than 50 countries, with 14 investigational drug depots located in emerging markets worldwide. Solid volume growth and expanding operating margins have favored World Courier unit in the quarter.
AmerisourceBergen outperformed its industry in a month's time. The company’s shares have gained 10.3% compared with the industry's rise of 5.1%. The current level is also higher than the S&P 500 index’s return of 1.7% .
A few better-ranked stocks in the broader medical space are Genomic Health (GHDX - Free Report) , Abiomed (ABMD - Free Report) and Stryker Corp. (SYK - Free Report) .
Genomic Health has an expected earnings growth rate of 187.5% for the current quarter. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Abiomed has a projected long-term earnings growth rate of 27%. The stock sports a Zacks Rank #1.
Stryker has a projected long-term earnings growth rate of 9.7%. The stock carries a Zacks Rank #2 (Buy).
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