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AmerisourceBergen (ABC) Q2 Earnings & Revenues Top Estimates

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·6 min read
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AmerisourceBergen Corporation ABC reported second-quarter fiscal 2022 adjusted earnings per share (EPS) of $3.22, which beat the Zacks Consensus Estimate of $2.99 by 7.7%. The bottom line improved 27.3% year over year.

GAAP EPS in the quarter was $2.59, up 23.3% from the year-ago period.

Revenue Details

Revenues increased 17.4% to $57.72 billion in the reported quarter. The top line beat the Zacks Consensus Estimate by 0.9%.

Segment Realignment Update

It is worth mentioning that AmerisourceBergen made a strategic evaluation of its reporting structure in order to represent its expanded international presence, courtesy of the June 2021 buyout of Alliance Healthcare. Consequently, starting from the second quarter of fiscal 2022, the company has realigned its reporting structure under two reportable segments —U.S. Healthcare Solutions and International Healthcare Solutions.

Segmental Analysis

U.S. Healthcare Solutions

Revenues at this segment totaled $50.94 billion, reflecting an increase of 5.8% on a year-over-year basis on the back of an increase in specialty product sales coupled with overall market growth. Lower revenues from commercial COVID-19 treatments partially offset the upside.

Segmental operating income was $729.5 million, up 11.4% year over year. Higher gross profit (which included fees earned associated with the distribution of government-owned COVID-19 treatments and gross profit on sales to specialty physician practices) contributed to the upside.

AmerisourceBergen Corporation Price, Consensus and EPS Surprise

AmerisourceBergen Corporation Price, Consensus and EPS Surprise
AmerisourceBergen Corporation Price, Consensus and EPS Surprise

AmerisourceBergen Corporation price-consensus-eps-surprise-chart | AmerisourceBergen Corporation Quote

International Healthcare Solutions

This segment includes Alliance Healthcare, World Courier, Innomar, Profarma and Profarma Specialty.
Revenues at this segment were $6.78 billion, up a whopping 585.3% year over year. The upside was mainly driven by the acquisition of Alliance Healthcare (June 2021).

Operating income in the segment was $187.1 million in the quarter, up 260.8% year over year, primarily due to the buyout of Alliance Healthcare.

Margin Analysis

In the fiscal second quarter, AmerisourceBergen reported an adjusted gross profit of $2.22 billion, up 46.6% on a year-over-year basis. As a percentage of revenues, adjusted gross margin was 3.8% in the quarter, up 70 basis points (bps).

The company reported an adjusted operating income of $916.6 million, up 29.7% year over year. As a percentage of revenues, adjusted operating margin was 1.6% in the quarter, which expanded 20 bps from the year-ago quarter.

Financial Position

The company exited the quarter with cash and cash equivalents worth $2.96 billion, compared with $3.17 billion a quarter ago.

Cumulative net cash used in operating activities at the end of the fiscal second quarter totaled $1.13 billion compared with $449.2 million in the prior-year quarter.

Dividend Update

During the quarter, AmerisourceBergen's board of directors declared a quarterly dividend of 46 cents per share, payable May 31, 2022, to shareholders at the close of business on May 16, 2022.

Fiscal 2022 Guidance

AmerisourceBergen has updated its fiscal 2022 outlook, highlighting a revised full-year outlook to represent the stronger-than-anticipated performance of some of its businesses.

Adjusted EPS is now estimated to be $10.80-$11.05 (up from the previously guided range of $10.60-$10.90). The Zacks Consensus Estimate currently stands at $10.76.

The company continues to estimate revenue growth in the high-single-digit to low-double-digit percent range.

With respect to the U.S. Healthcare Solutions segment, revenues are expected in the band of $207 billion to $212 billion, representing growth of 2-5%. Revenues at the International Healthcare solutions business are projected to be $26 billion to $27 billion.

Adjusted operating income is now projected to grow at least in the high-teens percent range (up from the previously guided high-teens percent range).

Operating income at the U.S. Healthcare Solutions segment is now anticipated between $2.42 billion and $2.48 billion (up from $2.38 billion and $2.45 billion), reflecting growth of 7-10%.

For the International Healthcare solutions segment, the metric is estimated to grow in the range of $685 million to $715 million.

Adjusted free cash flow is estimated to be $2 billion to $2.5 billion.

Summing Up

AmerisourceBergen exited the fiscal second quarter on a strong note, wherein both earnings and revenues beat the consensus mark. The company witnessed a robust segmental performance in the quarter under review. Expansion at both gross and operating margins is a positive.

Per management, AmerisourceBergen delivered a solid performance by continuing to play a crucial role in the healthcare system while maintaining execution throughout its business. Apart from this, the company's introduction of AB Health Ventures — a dedicated corporate venture capital fund — focused on investing in and collaborating with emerging healthcare startup companies that are involved in transforming healthcare for people and animals worldwide deserves a mention.

However, the company faces other headwinds like conversion of branded drugs and lower price generics. Cut-throat competition in the MedTech space remains a concern.

Zacks Rank

Currently, AmerisourceBergen carries a Zacks Rank #4 (Sell).

Key Picks

Some better-ranked stocks in the broader medical space that have announced quarterly results are Omnicell, Inc. OMCL, UnitedHealth Group Incorporated UNH and Alkermes plc ALKS.

Omnicell, carrying a Zacks Rank #2 (Buy), reported first-quarter 2022 adjusted EPS of 83 cents, which beat the Zacks Consensus Estimate by 16.9%. Revenues of $318.8 million outpaced the consensus mark by 0.7%. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Omnicell has an estimated long-term growth rate of 16%. OMCL's earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 13.4%.

UnitedHealth, carrying a Zacks Rank #2, reported first-quarter 2022 adjusted EPS of $5.49, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $80.1 billion outpaced the consensus mark by 1.9%.

UnitedHealth has an estimated long-term growth rate of 14.8%. UNH's earnings surpassed estimates in each of the trailing four quarters, the average surprise being 3.7%.

Alkermes reported first-quarter 2022 adjusted EPS of 12 cents, which beat the Zacks Consensus Estimate of a penny. First-quarter revenues of $278.6 million outpaced the Zacks Consensus Estimate by 6.2%. It currently sports a Zacks Rank #1.

Alkermes has an estimated long-term growth rate of 25.1%. ALKS' earnings surpassed estimates in each of the trailing four quarters, the average surprise being 350.5%.


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UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report

Alkermes plc (ALKS) : Free Stock Analysis Report

AmerisourceBergen Corporation (ABC) : Free Stock Analysis Report

Omnicell, Inc. (OMCL) : Free Stock Analysis Report

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