AmerisourceBergen Corp. ABC posted earnings (excluding employee severance, LIFO expense, warrants, litigation, restructuring and acquisition costs) of $1.45 per share in the second quarter of fiscal 2015, beating the Zacks Consensus Estimate of $1.18 and above the year-ago figure of $1.06.
Revenues grew 14.8% to $32.7 billion in the second quarter of fiscal 2015, easily surpassing the Zacks Consensus Estimate of $32.1 billion.
Fiscal Second-Quarter in Detail
AmerisourceBergen entered into a strategic agreement with Walgreen Boots Alliance WBA in fiscal 2013. The agreement included a 10-year pharmaceutical distribution contract with Walgreen and access to generic drugs and related pharmaceutical products through the Walgreen Boots Alliance Development joint venture.
Revenues from the Pharmaceutical Distribution segment (includes both AmerisourceBergen Drug Corporation [ABDC] and AmerisourceBergen Specialty Group [ABSG]) surged 13.7% to $31.8 billion. Within the segment, revenues from the ABDC business increased 13%, due primarily to the onboarding of the generic pharmaceuticals business from Walgreen, strong sales of hepatitis C drugs and solid organic growth from independent pharmacy, health systems and alternate site customers.
The ABSG unit also performed well during the quarter with revenues increasing 25% y/y. Results at the segment were driven by solid performance of the blood products, vaccine and physician office distribution businesses, robust growth in the third-party logistics business and an increase in sales to community oncologists.
During the quarter, the company acquired MWI Veterinary Supply, a leading animal health distribution company in the U.S., for approximately $2.5 billion.
Revenues from the Other segment (AmerisourceBergen Consulting Services, World Courier, and MWI Veterinary Supply) were $986.1 million, up 72.2% y/y.
Gross profit (adjusted) for the quarter increased 25.3% y/y to $1 billion primarily due to strong revenue growth in branded and generic pharmaceuticals in ABDC as well as in ABSG along with incremental revenues from the recent MWI Veterinary acquisition.
Fiscal 2015 Guidance Upped
AmerisourceBergen now expects earnings from continuing operations in the range of $4.85–$4.95 per share in fiscal 2015, up 22%–25% from fiscal 2014 and from the prior projection of $4.53–$4.63 per share. The pre-earnings Zacks Consensus Estimate of $4.62 is well within the company’s projected range.
AmerisourceBergen expects revenues to grow around 12%–13% in fiscal 2015.
Our Take
AmerisourceBergen currently carries a Zacks Rank #3 (Hold). We are encouraged by the solid second-quarter results, which beat the Zacks Consensus Estimate on both fronts driven by the onboarding of substantial new business from Walgreens and strong sales of hepatitis C drugs.
The increase in guidance was encouraging and should boost investor confidence. AmerisourceBergen will benefit from the generic business with Walgreen, which should positively impact results. Moreover, the MWI Veterinary Supply acquisition will expand the company’s existing pharmaceutical distribution & services businesses into the attractive animal health market, which holds huge potential at the moment.
Some better-ranked stocks in the broader healthcare sector include Biogen Inc. BIIB, and Horizon Pharma plc HZNP. Both these stocks carry a Zacks Rank #1 (Strong Buy).
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