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AmerisourceBergen (ABC) Beats on Q4 Earnings, Issues '19 View

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Maintaining the streak of positive earnings surprises, AmerisourceBergen Corporation (ABC - Free Report) posted adjusted earnings of $1.45 per share in the fourth quarter of fiscal 2018, beating the Zacks Consensus Estimate of $1.44 and improving 9% year over year.

The upside can be attributed to strong growth in the Pharmaceutical Distribution segment and the World Courier business.

Revenues improved almost 10.7% to $43.29 billion in the reported quarter. The figure missed the Zacks Consensus Estimate of $43.53 billion.

The stock has a Zacks Rank #3 (Hold).

Fiscal 2018 Results at a Glance

AmerisourceBergen registered revenues of $167.9 billion in fiscal 2018. This figure lagged the Zacks Consensus Estimate of $168.10 billion. The Pharmaceutical Distribution Services contributed to 96.3% of net revenues in fiscal 2018. The other segment accounted for 3.7% of net revenues.

Adjusted earnings came in at $6.49, surpassing the Zacks Consensus Estimate of $6.48.

AmerisourceBergen Corporation Price and Consensus

 

Segmental Analysis

Pharmaceutical Distribution Segment

Revenues in the segment were $41.73 billion, up 10.8% on a year-over-year basis. Operating income was $357 million, down 10.7% year over year.

Pharmaceutical Distribution witnessed favorable results in the quarter, courtesy of solid expansion in revenues and gross profit, the acquisition of H.D. Smith and especially strong oncology product sales.

However, lower sales in the PharMEDium segment partially offset operating income.

Other Segment

This segment includes AmerisourceBergen Consulting Services (ABCS), World Courier and MWI Veterinary Supply.

Revenues in the segment came in at $1.60 billion, up 7.9% year over year. Growth in the segment was driven by consolidation of the specialty joint venture in Brazil and revenues from MWI, ABCS's growth in Canadian operations and World Courier business.

Operating income in the segment was $75 million in the quarter, up 5.2% year over year. Lackluster performance in the ABCS’s Lash Group partially offset operating income in the segment.

Margin Analysis

In the quarter under review, AmerisourceBergen registered gross profit of $1.03 billion, down 11.9% on a year-over-year basis. As a percentage of revenues, gross margin was 2.4%, down 60 basis points (bps) from the prior-year quarter's tally.

AmerisourceBergen registered operating income of $154.1 million.

However, deducting distribution, selling and administrative expenses from gross profit, AmerisourceBergen registered adjusted operating income of $374.8 million, i.e. 0.9% of net revenues. This compares with 1.6% registered in the year-ago quarter. Thus, adjusted operating margin declined 70 bps year over year.

Guidance

Management expects revenue growth in the mid-single digit percent range for fiscal 2019. The Zacks Consensus Estimate is currently pegged at $179.83 billion.

Adjusted earnings per share (EPS) is expected in the range of $6.65-$6.95.  The Zacks Consensus Estimate is currently pegged at $6.48, which is below the guidance.

Earnings of Other MedTech Majors at a Glance

A few better-ranked stocks in the broader medical space which also reported solid earnings this season are Intuitive Surgical (ISRG - Free Report) , Stryker Corporation (SYK - Free Report) and Merit Medical Systems, Inc. (MMSI - Free Report) . Each of the stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intuitive Surgical reported third-quarter 2018 adjusted EPS of $2.83, which beat the Zacks Consensus Estimate of $2.65. Revenues totaled $920.9 million, also surpassing the consensus estimate of $918.6 million.

Stryker posted third-quarter 2018 adjusted EPS of $1.69, beating the Zacks Consensus Estimate by a penny. Operating margin was 17.8%, up 30 bps.

Merit Medical reported third-quarter 2018 adjusted EPS of 47 cents, which trumped the Zacks Consensus Estimate of 42 cents. Revenues of $221.6 million edged past the consensus estimate of $218 million.

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