AmerisourceBergen Corporation ( ABC ) posted earnings
(excluding employee severance, warrants, litigation and acquisition
costs) of 87 cents per share in the second quarter of fiscal 2013,
missing the Zacks Consensus Estimate of 88 cents. Earnings were up
7% year over year in the reported quarter aided by lower share
Revenues grew 4.1% to $20.5 billion in the second quarter of
fiscal 2013. However, reported revenues missed the Zacks Consensus
Estimate of $21.4 billion.
Quarter in Detail
Following the acquisition of the World Courier Group in 2012,
AmerisourceBergen made some adjustments in its reporting format.
The company decided to report results of the AmerisourceBergen Drug
Corporation (ABDC) and AmerisourceBergen Specialty Group (ABSG)
units under the Pharmaceutical Distribution segment. Results of the
World Courier Group and AmerisourceBergen Consulting Services
(ABCS) have been clubbed under "Other."
Revenues from the Pharmaceutical Distribution segment, which
accounted for 98% of total revenue, increased 3% to $20.1 billion
during the reported quarter.
The ABSG unit performed well during the quarter with revenues
increasing 4%. Results of the segment were boosted by growth in
third party logistics, blood products, and vaccine and physician
office distribution business. Revenues from the ABDC segment also
increased 4% primarily due to increased sales volume resulting from
the implementation of a new contract with Express Script,
Inc. ( ESRX ) effective Oct
2012. The growth was partially offset by the loss of a food
and drug retail group purchasing organization customer.
We note that AmerisourceBergen signed a three-year supply
agreement with Express Script in Oct 2012 wherein the former will
primarily supply branded pharmaceuticals to the latter.
Revenues from the Other segment were $435.4 million, including
significant contributions from the recent acquisition of World
Courier. The year-ago quarter did not include the World Courier
Gross profit for the quarter climbed 5.5% to $717.0 million.
Gross profit was boosted by AmerisourceBergen's recent acquisitions
and gains from antitrust litigation settlements.
Operating expenses (excluding employee severance and acquisition
costs) during the quarter grew 21.2% to $366.9 million due to
inclusion of the World Courier business.
Meanwhile, in order to streamline its operations,
AmerisourceBergen decided to sell its Canadian pharmaceutical
distribution business in Mar 2013, which was facing tough market
conditions. Hence, the company restated its fiscal 2012 figures to
incorporate the pending sale.
Additionally, AmerisourceBergen also agreed to sell
AndersonBrecon - its contract pharmaceutical packaging business in
the US and the UK, earlier this month.
AmerisourceBergen did not buy any shares in the second quarter
of fiscal 2013. Nevertheless, the company bought back shares worth
$284.7 million in the first half of fiscal 2013.
We note that AmerisourceBergen authorized a new share repurchase
program of $750 million in Nov 2012, having completed the earlier
buyback program (authorized in May 2012). This should help boost
the bottom line as the company still has $562.4 million remaining
under its new buyback program. We believe that the buyback program
highlights the company's commitment to return value to
Outlook for Fiscal 2013
AmerisourceBergen expects earnings from continuing operations
toward the lower end of the range of $3.04 - $3.14 per share for
fiscal 2013. The guidance excludes certain expenses (warrants
issued and inventory charges) related to the company's 10-year
agreement with Walgreens ( WAG ) and Alliance
Boots signed in Mar 2013. The pre-earnings Zacks Consensus Estimate
was pegged at $3.08 per share.
Excluding the expenses related to this agreement,
AmerisourceBergen expects revenues to grow in the range of 11% -
13%. The company plans to repurchase shares worth at least $400
million in 2013.
AmerisourceBergen currently carries a Zacks Rank #3 (Hold).
Currently, CVS Caremark Corp. ( CVS ) looks well placed
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