Zacks_Analysts' Blog : AmerisourceBergen Backs FY12 View - Analyst Blog

AmerisourceBergen Corp. (ABC) reiterated its fiscal 2012 (ending September 30) guidance at the recently held investor day.

The company continues to expect fiscal 2012 earnings in the range of $2.74 – $2.84 per share. The current fiscal 2012 Zacks Consensus Estimate of $2.81 lies at the higher end of the company’s guidance range.

Revenues are projected to experience flat-to-modest growth during fiscal 2012. Additionally, AmerisourceBergen plans to spend about $400 million on share repurchases.

The company expects operating margin to grow in the high single-digit to low double-digit basis points range. Free cash flow, which includes capital expenditures of about $150 million, is expected in the range of $700 to $800 million for fiscal 2012.

A Look Back into the Prior Quarter & Year

Last month, the company reported financial results for fourth quarter and fiscal year 2011. Fourth quarter earnings of 54 cents per share missed the Zacks Consensus Estimate of 56 cents. However, earnings increased 8.0% from the year-ago period. Fiscal 2011 earnings also missed the Zacks Consensus Estimate of $2.56 by a couple of cents. Nonetheless, earnings increased 14.4% from the year-ago figure.

The year-over-year increase in earnings was spurred by higher revenues and a lower share count.

Total revenue for the fourth quarter climbed 3.5% to $20.4 billion, beating the Zacks Consensus Estimate of $20.2 billion. Annual revenue also increased 2.9% to $80.2 billion, in line with the Zacks Consensus Estimate.

The quarterly year-over-year increase in revenues was the result of a 6% climb in AmerisourceBergen Drug Corporation’s revenue, offset by a 5% dip in AmerisourceBergen Specialty Group revenue.

Our View

We currently have a Neutral recommendation on AmerisourceBergen. The stock carries a Zacks #3 Rank (Hold rating) in the short-run. We believe the company is well-positioned for growth given the strong performance of its generics business. AmerisourceBergen boasts of a robust plasma and vaccine business, which is expected to generate strong revenues in the coming quarters.

However, AmerisourceBergen operates in a highly competitive pharmaceutical distribution market, which includes players like Cardinal Health Inc. (CAH) and McKesson Corporation (MCK).