EUR 850.00 For Business Accounts Only

Morningstar | Following Mixed Quarter at AmerisourceBergen, No Change to Our Thinking

AmerisourceBergen reported quarterly results that were mixed with lighter-than-expected revenue and better-than-expected cost controls. Although not discretely disclosed, management indicated generic and branded pricing have stabilized (to anticipated levels), which implies that volumes were likely softer than expected. Strong cost controls and timing of expenses carried the day and drove EPS upside relative to our expectations. Despite the $0.15 quarterly EPS upside, management only inched up full-year guidance by one third of the EPS benefit in the quarter. Shares are up roughly 5% intraday, which seems appropriate in light of the earnings upside and the significant discount from the 52-week high of $95. Results reinforce our belief that scale matters in healthcare distribution, and we therefore maintain our narrow moat rating and $86 per share fair value estimate.

Revenue is expected to grow in the midsingle digits. Despite the upside in quarterly EPS, guidance was increased only by $0.05 at the midpoint to $6.70 to $6.90 from prior guidance of $6.65 to $6.85. We suspect that the conservative outlook reflects some uncertainty around timing of expenses, brand and generic pricing and mix, and performance of PharMEDium (compounding) once operations resume.

For the fiscal second quarter, revenue grew 6% year over year to $43 billion, while normalized EPS increased 9% year over year to $2.11. Pharmaceutical distribution revenue increased 6%, driven by increased volumes from double-digit growth in specialty drugs, growth in Walgreens Boots Alliance, and stabilization in generic and brand pricing. Operating margin increased to 1.4%, unchanged from the prior year.