AmerisourceBergen Corporation’s (ABC) first quarter fiscal 2011 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 lower share count helped to boost earnings.
Total revenue for the quarter climbed 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% climb in AmerisourceBergen Drug Corporation revenues, partly offset by a 3.8% dip in AmerisourceBergen Specialty Group revenues.
Revenue growth at the AmerisourceBergen Drug Corporation segment was aided by higher sales to its biggest customers, while the decrease at the AmerisourceBergen Specialty Group was primarily attributed to the termination of an $800 million contract in September 2010.
Gross profit for the quarter increased 3.0% to $580.2 million. The improvement was driven by increased revenue with double-digit growth witnessed in generic sales. Operating income grew 5.5%, driven by a gross profit increase to $276.8 million. The company bought back shares worth $185 million during the reported quarter.
Fiscal 2011 Outlook Maintained
In addition to disclosing financial results, AmerisourceBergen reiterated its outlook for fiscal 2011. The company expects fiscal 2011 earnings in the range of $2.31–$2.41 per share. The current fiscal 2011 Zacks Consensus Earnings Estimate of $2.39 lies within the company’s guidance range.
The company, which projects revenue growth of 2%–4% in fiscal 2011, intends to spend about $400 million on share repurchases in fiscal 2011.
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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