AmerisourceBergen (ABC) Beats On Q1 Earnings, Trims EPS View

Maintaining the streak of positive earnings surprises, AmerisourceBergen Corporation’s (NYSE:ABC) first-quarter fiscal 2019 adjusted earnings per share (“EPS”) of $1.60 surpassed the Zacks Consensus Estimate of $1.50 and improved 3.2% year over year.

The better-than-expected bottom-line performance can be attributed to solid growth at the Pharmaceutical Distribution segment and the World Courier business.

Revenues improved almost 12.2% to $45.39 billion in the reported quarter. The figure outpaced the Zacks Consensus Estimate of $43.52 billion.

The stock has a Zacks Rank #3 (Hold).

AmerisourceBergen Corporation Price and Consensus

Segmental Analysis

Pharmaceutical Distribution Segment

Revenues at this segment totaled $43.74 billion, which increased 12.3% on a year-over-year basis. Segmental operating income was $373.2 million, down 3.9% year over year.

The company incurred some loss at the PharMEDium unit, which partially offset the operating income.

Other Segment

This segment includes AmerisourceBergen Consulting Services (ABCS), World Courier and MWI Veterinary Supply.

Revenues at this segment came in at $1.67 billion, up 8.2% year over year. This upside was driven by consolidation of the specialty joint venture in Brazil and revenues from MWI, ABCS's growth in Canadian operations and World Courier business.

Operating income in the segment was $98.9 million in the quarter, down 9.3% year over year. Lackluster performance in the ABCS’s Lash Group partially and the MWI unit offset operating income in the segment.

Margin Analysis

In the quarter under review, AmerisourceBergen registered adjusted gross profit of $1.20 billion, up 8.1% on a year-over-year basis. As a percentage of revenues, gross margin was 2.7% in the quarter, down 10 basis points year over year.

AmerisourceBergen registered adjusted operating income of $471.8 million, down 3.3% year over year.

Guidance

Adjusted EPS is expected in the range of $6.65-$6.85, lower than the previous guidance of $6.65-$6.95. The Zacks Consensus Estimate is currently pegged at $6.76, which is within the guided range.

Adjusted operating income growth is expected in the low-single-digit percent range.

Pharmaceutical Distribution Services segment’s operating income growth is also projected to be the low-single-digit percent range.

Bottom Line

AmerisourceBergen exited the fiscal first quarter on a solid note, beating the consensus mark on both counts. The company continues to gain from businesses like World Courier and Xcenda, which have been raking in huge profits since quite some time. Its specialty distribution business also continues to contribute significantly to its topline. Additionally, AmerisourceBergen’s Global Commercialization Services and Animal Health unit saw a strong first quarter.

On the flip side, dull performances by the company’s PharMEDium and Lash units have been a headwind over the last couple of quarters. Contraction in gross and operating margin in the last reported quarter is an added concern. The company faces other headwinds like conversion of branded drugs and lower price generics. Cutthroat competition in the MedTech space adds to the woes. A narrowed EPS guidance for 2019 is worrisome as well. Moreover, AmerisourceBergen’s Memphis facility is not likely reopen in this fiscal year.

Earnings of Other MedTech Majors at a Glance

Some better-ranked MedTech stocks which posted solid results in their respective quarters are Varian Medical Systems (NYSE:VAR) , Surmodics, Inc. (NASDAQ:SRDX) and AngioDynamics (NASDAQ:ANGO) .

Varian’s fiscal first-quarter adjusted EPS came in at $1.06 in line with the Zacks Consensus Estimate. Revenues of $741 million outpaced the consensus mark of $717.9 million. The stock has a Zacks Rank #2 (Buy).

Surmodics, Inc. (SRDX) reported adjusted earnings per share (EPS) of 12 cents in first-quarter fiscal 2019, comparing favorably with the Zacks Consensus Estimate of a loss of a penny. Earnings rose 20% from the year-ago quarter’s figure. The stock has a Zacks Rank of 2.

AngioDynamics’ fiscal second-quarter adjusted EPS of 22 cents exceeded the Zacks Consensus Estimate by a penny. Revenues totaled $91.5 million, which outshined the consensus estimate by 2.9%. The stock sports a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

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