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AmerisourceBergen (ABC) Up 1.6% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for AmerisourceBergen (ABC - Free Report) . Shares have added about 1.6% 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 Q2 Earnings Beat, Revenues Miss

AmerisourceBergen Corporation delivered second-quarter fiscal 2019 adjusted earnings per share (EPS) of $2.11 surpassing the Zacks Consensus Estimate of $1.96 by 7.7%, maintaining its streak of positive earnings surprises. The figure also improved 8.8% year over year.

The better-than-expected bottom-line performance can be attributed to increase in adjusted operating income and lower share count.

Revenues improved 5.6% to $43.32 billion in the reported quarter. However, the figure missed the Zacks Consensus Estimate of $43.58 billion by 0.6%.

Segmental Analysis

Pharmaceutical Distribution Segment

Revenues at this segment totaled $41.68 billion, increasing 5.6% on a year-over-year basis. Overall market growth, consistent robust specialty product sales and increase in some of its largest customers contributed to the improvement.

Segmental operating income was $517 million, up 5.7% year over year. Increase in gross profit drove the upside. However, an increase in operating expenses partially offset the uptick.

Other Segment

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

Revenues at this segment came in at $1.67 billion, up 4.5% year over year. This upside was driven by ABCS's growth in Canadian operations, World Courier business and MWI.

Operating income in the segment was $99.9 million in the quarter, up 2.9% year over year. Higher operating income at the company’s Canadian operations and World Courier business led to the improvement.

Margin Analysis

In the quarter under review, AmerisourceBergen registered adjusted gross profit of $1.3 billion, up 3.2% on a year-over-year basis. As a percentage of revenues, adjusted gross margin was 3% in the quarter, down 7 basis points year over year.

AmerisourceBergen registered adjusted operating income of $616.7 million, up 5.2% year over year. As a percentage of revenues, adjusted operating income was 1.4% in the quarter, down 1 basis point year over year.

Guidance Revised

Adjusted EPS is now estimated in the range of $6.70-$6.90 (up from the previously guided range of $6.65-$6.85). The Zacks Consensus Estimate is currently pegged at $6.75, which is within the guided range.

Further the company anticipates weighted average diluted shares to be about 214 million, down from the previous estimate of around 215 million.

It is important to note here that per management all the other previously announced aspects of the company’s fiscal year 2019 financial guidance and assumptions remain intact.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, AmerisourceBergen has a strong Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, 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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