Last week, AmerisourceBergen Corp. (ABC) posted third-quarter income from continuing operations of $125.13 million and earnings per share of $0.42, beating the Zacks Consensus Estimate by 3 cents. The company reported income from continuing operations of $112.77 million and earnings of $0.35 per share in the comparable quarter of 2008. The rise in income from continuing operations was due to a lower effective tax rate and lower interest expense.

Total revenue for the quarter increased 2.2% to $18.4 billion from $18.0 billion in the comparable quarter last year. This was attributable to a 2% growth in AmerisourceBergen Drug Corp. revenue, which was driven primarily by new business and a 6% rise in its specialty group sales. The company displayed strong revenue growth across all its operating segments, with good penetration in independent pharmacy, regional chain, alternate site and hospitals.

Generic revenue grew over 20% in the quarter, easily beating the generic market growth and reflecting new businesses and increased penetration across segments.

Gross profit for the third quarter was $519.2 million, which reflected a 4% increase over the gross profit in the year-ago period. The improvement was driven by strong generic sales and higher contribution from fee-for-service agreements with manufacturers.

AmerisourceBergen boasts of a disciplined working capital structure and a strong balance sheet. It recorded $398.0 million in cash flow from operations in the reported quarter.

The company expects earnings from continuing operations in the range of $1.59 to $1.65 per share for fiscal 2009, which reflects a 10% to 15% increase over $1.44 per share in the previous year. The guidance takes into account a two-for-one stock split which took place in June 2009.

AmerisourceBergen boasts of a robust plasma and vaccine business with strong revenue expected to flow from it in the coming quarters as well. The depth and strength of the product and service offerings within its specialty group should continue to deliver attractive margins in the future too.

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