AmerisourceBergen Beats in Q4, Raises 2011 View - Analyst Blog

AmerisourceBergen Corporation's (ABC) fourth quarter fiscal 2010 earnings of 50 cents per share surpassed the Zacks Consensus Estimate by 2 cents. Earnings increased 13.6% from the year-ago period. The higher earnings in the quarter were primarily due to the increase in revenues.

Total revenue for the reported quarter climbed 5.3% to $19.7 billion, surpassing the Zacks Consensus Estimate of $19.4 billion. The strong showing was due to 6% growth in AmerisourceBergen Drug Corporation revenues and a 4.2% rise in Specialty Group revenues.

Revenue growth at the AmerisourceBergen Drug Corporation segment was aided by market growth driven by its biggest customers. Meanwhile, generic revenues remained strong.

Gross profit for the fourth quarter was $592.8 million, which reflected a 10.1% increase over the year-ago period. The improvement was driven by increased revenue coupled with the impact of generic pharmaceuticals. Increased gross profit helped boost operating income by 10.5% to $248.2 million. The company bought back $120.1 million worth of shares during the reported quarter.

For the full-year 2010, AmerisourceBergen earned $2.17 per share (excluding litigation gains), against $1.67 per share a year-ago. The company's revenues climbed 8.6% in fiscal 2010 to $78 billion. The Zacks Consensus Estimates for fiscal 2010 earnings and revenues stood at $2.18 per share and $77.1 billion, respectively.

Fiscal 2011 Outlook Raised

In addition to disclosing financial results, AmerisourceBergen also raised its outlook for fiscal 2011. The company expects fiscal 2011 earnings in the range of $2.31-$2.41 per share, reflecting an increase in the 7% to 12% range from the fiscal 2010 level. The earlier projection hinted at a 7%-11% increase. The Zacks Consensus Estimate for fiscal 2011 currently stands at $2.35 per share.

The company, which projects revenue growth of 2%- 4% in fiscal 2011, intends to spend approximately $400 million towards the repurchase of its common stock in fiscal 2011.

Our Take & Recommendation

We believe the company is well-positioned for growth given the strong performance of its generics and specialty business. AmerisourceBergen boasts a robust plasma and vaccine business with strong revenues expected to flow from it in the coming quarters as well.

Even though the company carries a Zacks #2 Rank (short-term Buy rating) in the short-run, we are more cautious in the long-run and have a Neutral view on the stock.