AmerisourceBergen Corp. (ABC) posted second quarter fiscal 2010 earnings of 63 cents per share, beating the Zacks Consensus Estimate by 8 cents. Earnings increased 34% from the year-ago period. Performance was driven by strong revenues, successful generic drug launches, and continued expense management.
 
Total revenues for the quarter increased 11.5% to $19.3 billion. This was attributable to a 13% growth in AmerisourceBergen Drug Corp. revenues and a 5% rise in Specialty Group revenues.
 
AmerisourceBergen Drug Corp. revenues were driven by new customer additions and overall market growth. New business accounted for more than 4% of revenue growth. Meanwhile, generic revenues remained strong during the quarter.
 
Gross profit for the second quarter was $612.1 million, which reflected an 11% increase over the year-ago period. The improvement was driven by increased revenue and new generic pharmaceutical launches, especially in the specialty group.
 
Revenue growth, increased gross profit, and expense management helped boost operating income by 25% to $311.2 million.
 
Following the strong second quarter performance, AmerisourceBergen increased its guidance for fiscal 2010 for the second time this year. The company had earlier raised its guidance following strong first quarter results.
 
AmerisourceBergen now expects earnings in the range of $2.01 – $2.10, up 19% to 24% from fiscal 2009. The company was previously expecting earnings in the range of $1.89 to $1.98. Revenue growth guidance remains unchanged at 7-8%. Revenue growth should be in the range of 3-5% in the second half of fiscal 2010.
 
AmerisourceBergen reiterated its intention to spend about $350 million in share repurchases in fiscal 2010. During fiscal 2009, AmerisourceBergen had spent $450.4 million in share repurchases.
 
Going forward, AmerisourceBergen should continue to benefit from growth in the pharmaceutical industry which is driven by factors like aging population, increased use of generics and introduction of new treatments.
 
The company is well-positioned for growth given the strong performance of its generics and specialty pharma business. However, competition in the pharmaceutical distribution market remains tough given the presence of players like Cardinal Health (CAH) and McKesson (MCK). We currently have a Neutral recommendation on AmerisourceBergen.
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