April 23 Investment Digest Daily Alert
Today Blue Chip Growth Letter Editor Louis Navellier recommends a growth stock with multiple catalysts for upside.
“AmerisourceBergen Corp. (ABC) acts as an intermediary between pharmaceutical companies, hospitals, pharmacies, doctors and other health care providers that dispense drugs. The company operates mostly in Canada and the United States,
distributing generic, branded and over-the-counter drugs, as well as some medical supplies and other products. It also has a specialty distribution unit that concentrates on sensitive and complex biopharmaceuticals, cancer drugs, vaccines and plasma products.
“If you were with us last year, you may remember ABC. We held this stock from April 2010 to May 2012 and locked in a tidy 35% profit. The reason that I’m taking a second look at this company is that it is about to get leaner (and meaner, when it comes to profit potential). At the end of March, AmerisourceBergen agreed to sell its Canadian pharmaceutical distribution business to Kohl & Frisch Ltd. for as much as $100 million. And just recently, the company has announced that it is selling its contract packaging business, AndersonBrecon, for $308 million. Both deals are expected to close in the third quarter.
“I consider this a step in the right direction because it allows AmerisourceBergen to focus on its distribution, specialty and manufacturer services businesses. And clearly the analyst community agrees. While the company is expected post 9% sales growth and 10% earnings growth this year, that growth is expected to more than double in 2014 to 27% sales growth and 20% earnings growth.
“In the meantime, AmerisourceBergen Corp. releases its second-quarter results before market open next Thursday, April 25. Analysts currently forecast 6% sales growth and 9% earnings growth, and we’ll likely see the company declare its next quarterly dividend on or around this earnings announcement. Speaking of which, ABC yields 1.5%, the second highest dividend in the Wholesale Drugs industry. ABC also raised its dividend in 2012, making it the eighth consecutive year the company has upped its dividend payment. Between its solid dividend yield and its earnings prospects, I consider this Conservative stock a good buy under $58 per share.”
Louis Navellier, Blue Chip Growth Letter, May 2013