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AmerisourceBergen Beats on Q1 Earnings, Ups 2015 View - Analyst Blog

Zacks Equity Research
Updated

AmerisourceBergen Corp. (ABC) posted earnings (excluding employee severance, LIFO expense, warrants, litigation, restructuring and acquisition costs) of $1.14 per share in the first quarter of fiscal 2015 (ended Dec 31, 2014), beating the Zacks Consensus Estimate of 96 cents and above the year-ago figure of 80 cents per share.

AmerisourceBergen Corporation - Earnings Surprise | FindTheBest

Revenues grew 15.1% to $33.6 billion in the first quarter of fiscal 2015, easily surpassing the Zacks Consensus Estimate of $31.6 billion.

Fiscal First-Quarter in Detail

The company reports results of AmerisourceBergen Drug Corp. (ABDC) and AmerisourceBergen Specialty Group (ABSG) under its Pharmaceutical Distribution segment. Results of the World Courier Group and AmerisourceBergen Consulting Services (ABCS) segments have been clubbed under the Other segment.

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We remind investors that AmerisourceBergen had entered into a strategic agreement with Walgreen Boots Alliance (WBA) in fiscal 2013. The agreement included a 10-year pharmaceutical distribution contract with Walgreen and access to generic drugs and related pharmaceutical products through the Walgreen Boots Alliance Development joint venture.

Revenues from the Pharmaceutical Distribution segment surged 15.2% to $33.0 billion. Within the segment, revenues from the ABDC business increased 15%, due primarily to the onboarding of the generic pharmaceuticals business from Walgreen, strong sales of hepatitis C drugs and solid organic growth from independent pharmacy, health systems and alternate site customers.

The ABSG unit also performed well during the quarter with revenues increasing 26% y/y. Results of the segment were driven by solid performance of the blood products, vaccine and physician office distribution businesses, robust performance in third-party logistics business along with an increase in sales to community oncologists.

Revenues from the Other segment were $696.0 million, up 15.2% y/y.

Gross profit (adjusted) for the quarter increased 23.7% y/y to $896.3 million primarily due to strong revenue growth in branded and generic pharmaceuticals in ABDC as well as in ABSG.

Operating expenses (adjusted) during the quarter grew 14.6% to $460.8 million

Fiscal 2015 Guidance Upped

AmerisourceBergen now expects earnings from continuing operations in the range of $4.45–$4.55 per share in fiscal 2015, up 12%–15% from fiscal 2014 and from the prior projection of $4.36–$4.50 per share. The pre-earnings Zacks Consensus Estimate of $4.51 is toward the higher end of the guided range.

AmerisourceBergen expects revenues to grow around 10%–11% in fiscal 2015, up from the earlier projection of 7%–8%.

Earlier in the month, the company signed an agreement to acquire MWI Veterinary Supply, Inc. (MWIV), a leading animal health distribution company in the U.S., for $190 per share or approximately $2.5 billion. The updated guidance does not include the impact of the MWI transaction. However, the MWI Veterinary Supply acquisition will add 8 cents to the bottom line in the second half of fiscal 2015.

Our Take

AmerisourceBergen currently carries a Zacks Rank #2 (Buy). We are encouraged by the solid fiscal first-quarter results, which beat the Zacks Consensus Estimate on both fronts driven by the onboarding of substantial new business from Walgreens and strong sales of hepatitis C drugs.

The increase in guidance was encouraging. The generic calendar looks better in fiscal 2015 compared to fiscal 2014. AmerisourceBergen will benefit from a full year of the generic business with Walgreen, which should positively impact results. Moreover, the MWI Veterinary Supply acquisition will expand the company’s existing pharmaceutical distribution & services businesses into the attractive animal health market, which holds huge potential at the moment.

Right now, Cardinal Health (CAH) also looks attractive with the same rank as AmerisourceBergen.


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