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AmerisourceBergen Lifts FY20 Earnings Outlook; To Exit PharMEDium Business

While reporting its financial results for the first quarter on Thursday, AmerisourceBergen Corp. (ABC) raised its earnings outlook for fiscal 2020.

The company now forecasts adjusted earnings per share in a range of $7.55 to $7.80, up from the previous range of $7.30 to $7.60. The company now projects adjusted operating income growth in the mid-single digit percent range, up from the low-to mid-single percent range.

AmerisourceBergen noted that all other previously communicated aspects of its fiscal year 2020 financial guidance and assumptions are unchanged.

On average, analysts polled by Thomson Reuters expect the company to report earnings of $7.53 per share for the year on revenues of $190.38 billion. Analysts' estimates typically exclude special items.

In addition, the company's board of directors declared a quarterly dividend of $0.42 per common share, a 5 percent increase in the quarterly dividend rate from $0.40 per common share. The quarterly dividend will be payable March 2, 2020, to stockholders of record at the close of business on February 14, 2020.

Further, AmerisourceBergen said that in late January 2020, it decided to exit the PharMEDium compounding business and as a result, will cease all commercial and administrative operations related to this business.

The company noted that its decision to exit the PharMEDium business was due to several factors including, ongoing operational, regulatory, and commercial challenges, such as PharMEDium's decision in January 2020 to suspend production at the compounding facility in New Jersey pending facility upgrades related to the air handling and filtration systems.

In addition to the PharMEDium impairment charge of $138 million recognized in the three months ended December 31, 2019, the company expects to impair the majority of the remaining $55 million of PharMEDium tangible assets and all of the remaining $185 million of PharMEDium intangible assets in the three months ending March 31, 2020.

The company will also incur other costs, such as employee separation costs, in connection with exiting the PharMEDium compounding business during the fiscal year ending September 30, 2020 estimated to total about $80 million to $100 million.

As a result of exiting the PharMEDium compounding business, AmerisourceBergen expects to claim an ordinary income tax deduction and expects to realize a cash tax benefit in fiscal 2020 through fiscal 2022 totaling about $500 million to $600 million.

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