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Will AmerisourceBergen's (ABC) Q1 Earnings Disappoint?

AmerisourceBergen CorporationABC is set to report first-quarter fiscal 2016 results on Feb 4, 2016 before the opening bell.

AmerisourceBergen' track record has been mixed with the company having comfortably beaten estimates in three of the last four quarters. In the last reported quarter, AmerisourceBergen recorded a negative earnings surprise of 0.85%.

Overall, the company posted an average positive earnings surprise of 11.2% over the past four quarters. Let's see how things are shaping up for this announcement.

Factors Influencing this Quarter

Solid organic growth rates in the pharmaceutical market in the U.S., improved health reform initiatives and better generic launches should positively impact the company's results in the quarter. Additionally, the business will likely be positively impacted by incremental benefit from the MWI Supply acquisition.

Meanwhile, business from the company's largest customer, Walgreens, was strong in fiscal 2015 and is estimated to grow further in fiscal 2016.

AmerisourceBergen acquired privately held PharMEDium Healthcare Holdings, Inc. in Nov 2015. The acquisition will be accretive to fiscal 2016 results. PharMEDium is expected to contribute less than half of 1% to the top line in fiscal 2016.

However, the company is expected to face tailwinds in the form of declining dollar contribution from generic inflation, and the impact of repricing of the contract with the Department of Defense in the first half of fiscal 2015. The contract was renewed at less favorable terms and lower generic price appreciation.

Operating expenses are expected to increase due to the addition of the MWI Supply and PharMEDium businesses. Consequently, earnings per share are expected to grow in the mid-to-high single-digit range in the first quarter.

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 #1 (Strong Buy), #2 (Buy) or #3 (Hold) to be able to beat estimates. Unfortunately, that is not the case, as you will see below.

Zacks ESP: The Earnings ESP for AmerisourceBergen is 0.00%, as both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.25.

Zacks Rank: AmerisourceBergen carries a Zacks Rank #3, which when combined with a 0.00% ESP, makes a surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Shire plc SHPG has an Earnings ESP of +2.47% and a Zacks Rank #3. The company is expected to release fourth-quarter and full-year 2015 results on Feb 11.

Sanofi SNY has an Earnings ESP of +2.86% and a Zacks Rank #3. It is scheduled to report full-year results on Feb 9.

Cytokinetics, Incorporated CYTK has an Earnings ESP of +6.45% and a Zacks Rank #3. The company is expected to release fourth-quarter results on Feb 16.

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SANOFI-AVENTIS (SNY): Free Stock Analysis Report

CYTOKINETCS INC (CYTK): Free Stock Analysis Report

AMERISOURCEBRGN (ABC): Free Stock Analysis Report

SHIRE PLC-ADR (SHPG): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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