Avondale recently increased its rating on this pharmaceutical firm from Market Perform to Market Outperform. The company beat EPS estimates by ten cents last quarter, and its management recently increased its guidance of full-year 2016
AmerisourceBergen Corporation (ABC)
From Argus Weekly Staff Report
AmerisourceBergen Corporation (ABC) has extended existing contracts with two of its largest customers, Kaiser Permanente and Express Scripts, which we expect to boost revenue going forward. At the same time, businesses such as MWI, PharMedium, and World Courier are driving higher profitability. As one of the largest pharmaceutical distributors, ABC is also likely benefit from the increased utilization of generic and specialty drugs. We expect ABC to improve its gross and operating margins as it absorbs the impact of contract repricing and generic price deflation.
Reflecting the strong 3Q16 results, management has raised its full-year EPS guidance. It now expects adjusted EPS of $5.52-$5.57, up from a prior view of $5.44-$5.54. For FY17, it expects adjusted EPS to grow 4%-6% from the midpoint of its revised FY16 forecast. Based on the updated guidance, we are raising our adjusted EPS estimates to $5.54 from $5.52 for FY16 and to $6.12 from $6.10 for FY17.
ABC shares trade at 13.0-times our FY17 EPS estimate, below the peer average for our coverage universe of healthcare services stocks. We view this valuation as attractive, and are reiterating our BUY rating and $135 target price.
Jim Kelleher, CFA, Argus Weekly Staff Report, www.argusresearch.com, 212-425-7500, October 21, 2016