AmerisourceBergen Corporation (NYSE:ABC) has been on a healthy growth trajectory, of late. Over the past three months, the company has outperformed its industry. The stock has gained 5.3% compared with the industry’s rally of 3.3%. Also, the company has outperformed the S&P 500 index’s 2.2% gain.
The leading pharmaceutical services company focuses on providing drug distribution and related services to reduce health care costs and improve patient outcomes. AmerisourceBergen has a market cap of $19.48 billion. The companyhas a positive earnings surprise of 5.87% for the last four quarters. Also, it has a long-term expected earnings growth rate of 10.2%.
Backed by such prospects, this Zacks Rank #2 (Buy) stock is an attractive pick for investors at the moment.
The company’s estimate revision trend for the current year has been positive. In the past 60 days, seven analysts revised their estimates upward with no movement in the opposite direction. Resultantly, earnings estimates improved around 5.3% to $6.52 per share.
Per our Style Score, AmerisourceBergen sports a Value Score of B which indicates the company’s strong prospects. Our research shows that stocks with a Value Style Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
In this regard, AmerisourceBergen has favorable Price/Earnings to Growth (PEG) ratio of 1.49 compared with the broader industry’s 1.85. Moreover, surpassing the industry’s 7.96 cash flow per share, AmerisourceBergen’s 1.37 signifies that it is a favorable value pick.
Let’s find out whether the recent positive trend is a sustainable one.
We are upbeat about AmerisourceBergen’s active pursuit of acquisitions to strengthen core areas. Recently, the company announced the buyout of H.D. Smith — the largest independent wholesaler in the United States — for $815 million in cash.
The MWI Veterinary acquisition has diversified the company’s existing pharmaceutical distribution & services businesses into the attractive animal health market, which holds huge potential at the moment. Meanwhile, the acquisition of PharMEDium enhanced the company’s ability to provide market-leading services and solutions to its health system customers, a segment that is playing an increasingly important role in the healthcare market in the United States.
We believe that AmerisourceBergen will benefit from generics growth in the long run. The first quarter of fiscal 2018 marked the company’s 16th consecutive quarter with 10% or greater revenue growth for this part of its business. At the end of the first quarter, management confirmed that the company’s strategic and focused effort is driving generic product volume growth to offset historic deflation rates.
Notably, the company is well-positioned to ensure that products reach the market and that patients can access traditional and complex new therapies across all sites of care. Strong organic growth rates in the U.S. pharmaceutical market, improving patient access to care, improved economic conditions and population demographics, introduction of new innovative drugs like hepatitis C drugs as well as a consistent brand pricing environment should drive growth.
Also, the company’s World Courier business has been faring well. Notably, at the end of first-quarter fiscal 2018, World Courier’s company-owned offices were spread across in more than 50 countries, with 14 investigational drug depots located in emerging markets worldwide.
Other Key Picks
A few other top-ranked stocks in the broader medical sector are Bio-Rad Laboratories (NYSE:BIO) , athenahealth, Inc. (NASDAQ:ATHN) and PerkinElmer (NYSE:PKI) .
Bio-Rad Laboratories sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here. The company has a long-term expected earnings growth rate of 20%.
athenahealth is a Zacks #1 Ranked player. The company has a long-term expected earnings growth rate of 21.5%.
PerkinElmer has a long-term expected earnings growth rate of 12.3%. The stock carries a Zacks Rank #2.
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