AmerisourceBergen Corporation (ABC) recently announced the retirement of its Chief Executive Officer (CEO) R. David Yost, effective July 1, 2011. Steven H. Collis is expected to succeed Yost, also effective July 1.
Yost, who is almost 64 years old, has been with AmerisourceBergen for the last 37 years, serving as the CEO for 14 years. Further, Collis, who has been with the company for 17 years, is currently the President and Chief Operating Officer of AmerisourceBergen. Collis was promoted to this post in November last year, prior to which he served as the Executive Vice President of AmerisourceBergen Drug Corporation (ABDC). Collis founded AmerisourceBergen Specialty Group (ABSG), one of the main revenue generating segments of the company.
Following this announcement, the company reiterated its fiscal year 2011 earnings guidance range of $2.31 to $2.41 per share. AmerisourceBergen reported its first quarter fiscal 2011 financial results in early February, where earnings of 57 cents per share surpassed the Zacks Consensus Estimate by 4 cents. Earnings also increased 9.6% from the year-ago period. Higher revenues and a lower share count helped in the growth.
Moreover, total revenue for the recently reported quarter went up 2.9% to $19.9 billion, in line with the Zacks Consensus Estimate. The year-over-year increase was the result of a 4.8% increase in ABDC revenues, partly offset by a 3.8% dip in ABSG revenues.
On the first quarter conference call, the company projected revenue growth of 2%–4% in fiscal 2011, along with its plans to spend about $400 million on share repurchases.
Our Take
We currently have a Neutral recommendation on AmerisourceBergen, which is supported by a Zacks #3 Rank (short-term Hold rating). We believe the company is well-positioned for growth given the strong performance of its generics and specialty business. AmerisourceBergen boasts of a robust plasma and vaccine business with strong revenues expected to flow from it in the coming quarters.
However, AmerisourceBergen operates in a highly competitive pharmaceutical distribution market. The company’s primary competitors are Cardinal Health Inc. (CAH) and McKesson Corporation (MCK).
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