AmerisourceBergen (ABC) Q4 Earnings: Will It Disappoint?

AmerisourceBergen Corp.’s (NYSE:ABC) fourth-quarter fiscal 2017 results, scheduled for release on Nov 2, are expected to show steady growth in pharmaceutical distribution segment, a significant contributor to revenues. While this could majorly drive fourth-quarter earnings, let us take a look at the broader factors that are expected to influence the quarterly release.

AmerisourceBergen’s earnings in the preceding quarter surpassed the Zacks Consensus Estimate, courtesy of strong growth in Consulting Services, MWI Animal Health and World Courier businesses. Revenues rose almost 4.9% to $38.7 billion in the quarter.

The Zacks Consensus Estimate for the Pharmaceutical Distribution segment stands at $38.34 billion for the quarter under review. This reflects an improvement of almost 6.5% from the year-ago quarter.

AmerisourceBergen Corporation (Holding Co) Price, Consensus and EPS Surprise

AmerisourceBergen Corporation (Holding Co) Price, Consensus and EPS Surprise | AmerisourceBergen Corporation (Holding Co) Quote

Other Factors to Consider

Meanwhile, the Zacks Consensus Estimate for AmerisourceBergen’s earnings stands at $1.32 per share, up 1.8% year over year. The company should benefit from continued solid organic revenue growth, MWI and PharMedium acquisition. The consensus estimate for net revenues is pegged at $40.1 billion, signifying growth of 6.7% on a year-over-year basis.

On the flipside, although generic inflation has been nominal, the rate of deflation is rising gradually. These factors, combined with an anticipated shift in product mix toward lower-margin and higher-priced specialty and branded drugs and lack of generic inflation, will affect the company’s bottom line.

The temporary slowdown in the PharMEDium segment is expected to mar AmerisourceBergen's bottom line in the fourth quarter. Notably, the company aims to boost its investments to enhance PharMEDium's quality assurance (QA) and quality control (QC) systems in terms of product quality and patient safety. Although this lends the company a competitive edge, it might affect the bottom line in fourth-quarter fiscal 2017.

However, our quantitative model does not conclusively show an earnings beat for AmerisourceBergen this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates. This is not the case here, as you will see below.

Zacks ESP: Earnings ESP for AmerisourceBergen is -0.54%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: AmerisourceBergen currently carries a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s negative ESP makes surprise prediction difficult.

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

INC Research Holdings, Inc. (NASDAQ:INCR) has an Earnings ESP of +1.74% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Medpace Holdings Inc. (NASDAQ:MEDP) has an Earnings ESP of +0.47% and a Zacks Rank #3.

Henry Schein, Inc. (NASDAQ:HSIC) has an Earnings ESP of +1.00% and a Zacks Rank #3.

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