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Here's Why You Should Retain AmerisourceBergen (ABC) Stock
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AmerisourceBergen Corporation is well-poised for growth on the back of its robust pharmaceutical distribution business and prudent acquisitions. Intense competition remains a concern.
Shares of the Zacks Rank #3 (Hold) company have gained 26.4%, compared with the industry’s growth of 4.9% in a year’s time. The S&P 500 Index has rallied 23.7% in the same time frame.
AmerisourceBergen — with a market capitalization of $28.02 billion — is one of the world’s largest pharmaceutical services companies, which is focused on providing drug distribution and related services to reduce health care costs and improve patient outcomes. It anticipates earnings to improve 8% over the next five years. The company beat earnings estimates in each of the trailing four quarters, the average surprise being 5.5%.
What’s Driving Growth?
Pharmaceutical Distribution serves healthcare providers in the pharmaceutical supply channel. AmerisourceBergen has been witnessing strong revenue growth in this unit in the last couple of quarters. Increasing volume and an expanding customer base have been driving the segment. Strong organic growth rates in the U.S. pharmaceutical market, improving patient access to medical care, enhanced economic conditions and population demographics are likely to continue benefiting the segment in the quarters ahead.
In fiscal fourth-quarter 2021, revenues in the segment totaled $51.25 billion, reflecting an increase of 8.4% on a year-over-year basis driven by an increase in specialty product sales, including COVID-19 treatments coupled with overall market growth. Segmental operating income was $472.1 million, up 10.9% year over year. Solid performance across the company’s distribution businesses, which include higher sales of specialty products, contributed to the upside.
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AmerisourceBergen has been actively pursuing acquisitions to strengthen its core areas. In January 2021, the company inked a strategic deal with Walgreens Boots Alliance to acquire the majority of the latter’s Alliance Healthcare business for around $6.5 billion, which comprises $6.275 billion in cash and 2 million shares of AmerisourceBergen common stock.
In June, the company closed this buyout, which will provide a boost to AmerisourceBergen’s platform. This, in turn, will help the platform deliver sustained growth throughout pharmaceutical distribution and manufacturer services. The deal will offer expanded scale and added services that will enable the combined business to better support pharmaceutical innovation through a global presence of broad leadership and local expertise.
What’s Weighing on the Stock?
AmerisourceBergen operates in a highly competitive pharmaceutical distribution and related health care services market. The company’s primary competitors include Cardinal Health, McKesson along with national generic distributors and regional distributors. The generic industry is facing consolidation of customers and manufacturers, globalization and increasing quality and regulatory challenges. The company faces additional competition from manufacturers, chain drugstores, specialty distributors and packaging and health care technology companies. Increased competition will impact the company’s business.
Estimates Trend
AmerisourceBergen has been witnessing an upward estimate revision trend for fiscal 2022. In the past 60 days, the Zacks Consensus Estimate for its earnings has moved north by 0.2% to $10.68.
The Zacks Consensus Estimate for fiscal first-quarter 2022 revenues is pegged at $59.31 billion, suggesting growth of 12.9% from the year-ago reported number.
Stocks to Consider
Some better-ranked stocks in the broader medical space include AMN Healthcare Services, Inc. (AMN - Free Report) , Henry Schein, Inc. (HSIC - Free Report) and Laboratory Corporation of America Holdings (LH - Free Report) .
AMN Healthcare surpassed earnings estimates in each of the trailing four quarters, the average surprise being 19.5%. The company currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare’s long-term earnings growth rate is estimated at 16.2%. The company’s earnings yield of 5.5% compares favorably with the industry’s 0.8%.
Henry Schein beat earnings estimates in each of the trailing four quarters, the average surprise being 21.9%. The company currently carries a Zacks Rank #2 (Buy).
Henry Schein’s long-term earnings growth rate is estimated at 11.8%. The company’s earnings yield of 5.9% compares favorably with the industry’s 4.1%.
Laboratory Corporation surpassed earnings estimates in each of the trailing four quarters, the average surprise being 25.7%. The company currently sports a Zacks Rank #1.
Laboratory Corporation’s long-term earnings growth rate is estimated at 10.6%. The company’s earnings yield of 9.4% compares favorably with the industry’s 3.4%.
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Here's Why You Should Retain AmerisourceBergen (ABC) Stock
AmerisourceBergen Corporation is well-poised for growth on the back of its robust pharmaceutical distribution business and prudent acquisitions. Intense competition remains a concern.
Shares of the Zacks Rank #3 (Hold) company have gained 26.4%, compared with the industry’s growth of 4.9% in a year’s time. The S&P 500 Index has rallied 23.7% in the same time frame.
AmerisourceBergen — with a market capitalization of $28.02 billion — is one of the world’s largest pharmaceutical services companies, which is focused on providing drug distribution and related services to reduce health care costs and improve patient outcomes. It anticipates earnings to improve 8% over the next five years. The company beat earnings estimates in each of the trailing four quarters, the average surprise being 5.5%.
What’s Driving Growth?
Pharmaceutical Distribution serves healthcare providers in the pharmaceutical supply channel. AmerisourceBergen has been witnessing strong revenue growth in this unit in the last couple of quarters. Increasing volume and an expanding customer base have been driving the segment. Strong organic growth rates in the U.S. pharmaceutical market, improving patient access to medical care, enhanced economic conditions and population demographics are likely to continue benefiting the segment in the quarters ahead.
In fiscal fourth-quarter 2021, revenues in the segment totaled $51.25 billion, reflecting an increase of 8.4% on a year-over-year basis driven by an increase in specialty product sales, including COVID-19 treatments coupled with overall market growth. Segmental operating income was $472.1 million, up 10.9% year over year. Solid performance across the company’s distribution businesses, which include higher sales of specialty products, contributed to the upside.
AmerisourceBergen has been actively pursuing acquisitions to strengthen its core areas. In January 2021, the company inked a strategic deal with Walgreens Boots Alliance to acquire the majority of the latter’s Alliance Healthcare business for around $6.5 billion, which comprises $6.275 billion in cash and 2 million shares of AmerisourceBergen common stock.
In June, the company closed this buyout, which will provide a boost to AmerisourceBergen’s platform. This, in turn, will help the platform deliver sustained growth throughout pharmaceutical distribution and manufacturer services. The deal will offer expanded scale and added services that will enable the combined business to better support pharmaceutical innovation through a global presence of broad leadership and local expertise.
What’s Weighing on the Stock?
AmerisourceBergen operates in a highly competitive pharmaceutical distribution and related health care services market. The company’s primary competitors include Cardinal Health, McKesson along with national generic distributors and regional distributors. The generic industry is facing consolidation of customers and manufacturers, globalization and increasing quality and regulatory challenges. The company faces additional competition from manufacturers, chain drugstores, specialty distributors and packaging and health care technology companies. Increased competition will impact the company’s business.
Estimates Trend
AmerisourceBergen has been witnessing an upward estimate revision trend for fiscal 2022. In the past 60 days, the Zacks Consensus Estimate for its earnings has moved north by 0.2% to $10.68.
The Zacks Consensus Estimate for fiscal first-quarter 2022 revenues is pegged at $59.31 billion, suggesting growth of 12.9% from the year-ago reported number.
Stocks to Consider
Some better-ranked stocks in the broader medical space include AMN Healthcare Services, Inc. (AMN - Free Report) , Henry Schein, Inc. (HSIC - Free Report) and Laboratory Corporation of America Holdings (LH - Free Report) .
AMN Healthcare surpassed earnings estimates in each of the trailing four quarters, the average surprise being 19.5%. The company currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare’s long-term earnings growth rate is estimated at 16.2%. The company’s earnings yield of 5.5% compares favorably with the industry’s 0.8%.
Henry Schein beat earnings estimates in each of the trailing four quarters, the average surprise being 21.9%. The company currently carries a Zacks Rank #2 (Buy).
Henry Schein’s long-term earnings growth rate is estimated at 11.8%. The company’s earnings yield of 5.9% compares favorably with the industry’s 4.1%.
Laboratory Corporation surpassed earnings estimates in each of the trailing four quarters, the average surprise being 25.7%. The company currently sports a Zacks Rank #1.
Laboratory Corporation’s long-term earnings growth rate is estimated at 10.6%. The company’s earnings yield of 9.4% compares favorably with the industry’s 3.4%.