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Why Is AmerisourceBergen (ABC) Up 1.2% Since Last Earnings Report?

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It has been about a month since the last earnings report for AmerisourceBergen (ABC - Free Report) . Shares have added about 1.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is AmerisourceBergen due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

AmerisourceBergen Q4 Earnings Beat, PharMEDium Down

AmerisourceBergen 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.

Segmental Analysis

Pharmaceutical Distribution Segment

Revenues at 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 recorded 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 at the PharMEDium segment partially offset operating income.

Other Segment

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

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

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.

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.

Adjusted earnings per share are expected in the range of $6.65-$6.95.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, AmerisourceBergen has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

AmerisourceBergen has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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