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What's in Store for AmerisourceBergen (ABC) in Q4 Earnings?

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AmerisourceBergen Corporation’s (ABC - Free Report) fourth-quarter fiscal 2018 results are scheduled to release on Nov 6, before the market opens.

While the company’s core Pharmaceutical Distribution unit is likely to drive growth, stiff competition is likely to mar prospects.

Q3 Results at a Glance

In the last reported quarter, AmerisourceBergen posted adjusted earnings of $1.54 per share, beating the Zacks Consensus Estimate of $1.45 and improving 7.7% year over year. Revenues improved almost 11.5% to $43.14 billion in the reported quarter. The figure surpassed the Zacks Consensus Estimate of $42.96 billion.

The company delivered positive earnings surprise in the trailing four quarters, the average being 6.9%.

AmerisourceBergen Corporation Price and Consensus

 

Which Way are Estimates Treading?

For the quarter to be reported, the Zacks Consensus Estimate for revenues is pegged at $43.53 billion, reflecting year-over-year growth of 11.3%. The same for earnings is pegged at $1.44, showing year-over-year growth of 8.3%.

Let’s dig deeper to analyze how things are shaping up before the earnings announcement.

Factors to Consider

Pharmaceutical Distribution to Drive Q4

Fiscal fourth-quarter revenues in the segment are likely to witness increasing volume and an expanding customer base. This segment serves healthcare providers in the pharmaceutical supply channel. In the last reported quarter, the Pharmaceutical Distribution segment accounted for 96.4% of the company’s net revenues. Moreover, the segment’s revenues grew 11.6% on a year-over-year basis to $41.58 billion.

It is encouraging to note that the Zacks Consensus Estimate for the quarter to be reported stands at $41.99 billion, showing an improvement of 11.5% from the year-ago quarter.

Per management, the segment surpassed the company’s expectations in the last couple of quarters. Strong organic growth rates in the U.S. pharmaceutical market, improving patient access to medical care, improved economic conditions and population demographics should reflect in the results for the fiscal fourth quarter.

Other Segment

This segment consists of Global Commercialization Services and Animal Health, and includes World Courier, AmerisourceBergen Consulting and MWI.In the last reported quarter, the Other segment contributed 3.6% to the company’s net revenues. Notably, revenues in the segment improved 8.8% year over year to $1.60 billion in the fiscal third quarter.

We expect the segment to witness robust growth in the quarter to be reported. The Zacks Consensus Estimate for the quarter under review is pegged at $1.61 billion, showing sequential rise of 0.9%.

The World Courierunit, in particular, is likely to be one of the key drivers of the Other segment. Not to forget, the World Courier business delivered excellent results, with record gains in the last reported quarter. The unit witnessed outstanding operating income growth as well. We expect similar trends in the fiscal fourth quarter.

However, the MWI unit within the Other segment remained flat on a year-over-year basis because of certain internal issues in the last reported quarter.

Competition Likely to Mar Q4 Top Line

Cutthroat competition in the MedTech space might mar revenues in the fiscal fourth quarter.

AmerisourceBergen operates in a highly competitive pharmaceutical distribution and related healthcare services market. The company’s primary competitors include Cardinal Health and McKesson along with national generic distributors and regional distributors.

What our Model Says

Per our proven quantitative model, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive earnings surprise. This is not the case here as you will see below.

Earnings ESP: AmerisourceBergen has an Earnings ESP of +0.23%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: AmerisourceBergen currently carries a Zacks Rank #4 (Sell).

Please note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is witnessing negative estimate revision.

Stocks Worth a Look

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat in their upcoming quarterly results.

BioLife Solutions, Inc. (BLFS - Free Report) has an Earnings ESP of +36.36% and a Zacks Rank #3.

ICU Medical, Inc. (ICUI - Free Report) has an Earnings ESP of +8.65% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

OraSure Technologies, Inc. (OSUR - Free Report) has an Earnings ESP of +4.76% and a Zacks Rank #2.

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