AmerisourceBergen Corporation ( ABC ) one of the world's largest pharmaceutical services companies with focus on drug distribution and related services, is set to report first-quarter fiscal 2015 results on Jan 28, 2015.
Last quarter, AmerisourceBergen had reported a 4.8% positive surprise. The company's track record has been quite impressive as it has delivered positive earnings surprises in all of the past four quarters with an average beat of 5.4%.
Factors Influencing This Quarter
Revenues should benefit from improved growth rates in the U.S. pharmaceutical market, driven by rise in overall script and volume from an improving economy, health reform initiatives and successful product launches. Generic inflation is expected to remain flat compared with fiscal 2014.
AmerisourceBergen had 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 (JV).
AmerisourceBergen will benefit from a full year of the generic business with Walgreen, which should positively impact results in the quarter and continue into fiscal 2015. Incremental generics business from Walgreen is likely to impact results by 2% in fiscal 2015.
However, reimbursement issues for community oncologists remain a concern. Although the generic calendar looks better in fiscal 2015 compared to fiscal 2014, the generic version of Nexium has been delayed to Jun 2015 whereby the company will not be able to reap the benefits of six months of exclusivity. Revenue growth is also likely to be dampened by the loss of a customer.
What Our Model Indicates
Our proven model does not conclusively show that AmerisourceBergen is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP : Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is pegged at 0.00%. This is because both the Most Accurate Estimate and Zacks Consensus Estimate currently stand at 96 cents.
Zacks Rank : AmerisourceBergen's Zacks Rank #2 (Buy) when combined with a 0.00% ESP makes a surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks That Warrant a Look
Here are some health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.
AbbVie Inc. ( ABBV ) has an earnings ESP of +1.18% and carries a Zacks Rank #2. It will report fourth-quarter 2014 results on Jan 30.
Biodel Inc. ( BIOD ) has an Earnings ESP of +33.33% and carries a Zacks Rank #1. The company is scheduled to release first-quarter fiscal 2015 results on Feb 5.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.