Zacks_Analysts' Blog : AmerisourceBergen Posts EPS In Line - Analyst Blog

AmerisourceBergen Corporation (ABC) posted first quarter fiscal 2012 adjusted earnings of 63 cents per share, in line with the Zacks Consensus Estimate. However, earnings increased 10.5% from the year-ago period, spurred by higher revenues and a lower share count.

Revenues

Total revenue for the fourth quarter edged up 2.4% to $20.4 billion, beating the Zacks Consensus Estimate of $20.0 billion. The increase in revenues was the result of a 2.1% climb in AmerisourceBergen Drug Corporation’s revenue, and a 3.9% rise in AmerisourceBergen Specialty Group revenue.

Revenue growth at the AmerisourceBergen Drug Corporation segment was driven by robust performance of retail and institutional segments, while the AmerisourceBergen Specialty Group benefited from growth in third party logistics.

Other Details

Gross profit for the quarter increased 2.2% to $593.1 million. Lower LIFO charge in this quarter as against the year-ago quarter resulted in the improved gross profit.

As a result of higher gross profit, operating income also increased 2.9% to $284.9 million. AmerisourceBergen bought back shares worth $128 million, during the first quarter of fiscal 2012.

Outlook Reaffirmed

The company reiterated its fiscal 2012 earnings expectation of $2.74 – $2.84 per share. The current fiscal 2012 Zacks Consensus Estimate of $2.82 lies at the higher end of the guidance range.

AmerisourceBergen continues to project flat to modest revenue growth, and intends to spend about $400 million on share repurchases in 2012.

Further, 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.

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 are expected to contribute strong revenues in the coming quarters.

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