Drug distributor AmerisourceBergen Corp. (ABC) on Tuesday reported a 13% increase in profit for the fourth quarter, helped by strong generic sales, lower expenses and an increased contribution from fee-for-service agreements. For fiscal year 2010, the company forecasts higher earnings and a 5-7% growth in revenues from the preceding year.
Fourth-Quarter Results
The Valley Forge, Pennsylvania-based company's net income for the fourth quarter increased to $130.15 million or $0.44 per share from $114.91 million or $0.36 per share in the prior-year quarter. On average, 16 analysts polled by Thomson Reuters expected the company to earn $0.40 per share for the quarter. Analysts' estimates typically exclude special items.
While reporting its financial results for the third quarter in July, AmerisourceBergen had said it expects to achieve the higher end of the fourth-quarter earnings outlook range of $0.34-$0.40 per share.
Income from continuing operations for the quarter rose to $130.15 million or $0.44 per share from $115.06 million or $0.36 per share in the previous-year quarter.
Total revenue for the quarter increased 9.1% to $18.72 billion from $17.16 billion in the same period last year, and topped analysts' consensus revenue estimate of $18.06 billion for the quarter. The increase in revenue for the quarter reflects a 10% growth in AmerisourceBergen Drug Corp. revenue, which was driven primarily by new business, and improved market growth.
David Yost, President and Chief Executive Officer of AmerisourceBergen, said, "Our outstanding results in the September quarter were driven by strong revenue growth, including continued above-market sales growth in generic drugs; excellent performance by our higher-margin specialty distribution and services business; expense discipline that held our dollar expense below the previous year's fourth quarter; and great working capital management."
Peer Performance
In late October, McKesson Corp. (MCK) said its profit for the second quarter declined 8% from last year, hurt by higher interest and income tax expenses. The company reported net income for the second quarter of $301 million or $1.11 per share, compared to net income of $327 million or $1.17 per share in the year-ago quarter. Revenues for the latest quarter increased 2% to $27.13 billion from $26.57 billion in the prior-year quarter.
Other Metrics
AmerisourceBergen's gross profit for the third quarter increased 2.1% to $538.53 million from $527.45 million in the year-ago quarter, helped by strong generic drug sales and an increased contribution from fee-for-service agreements with brand-name pharmaceutical manufacturers. This was offset in part by customer mix and the re-pricing of a major customer contract on July 1, 2009 as part of the long-term renewal of the contract.
Operating expense for the quarter declined by $10.8 million from the year-ago period, reflecting scale efficiencies, continued cost discipline, reductions in bad debt expense and asset impairments as well as facility consolidations.
Operating income for the period rose 11% to $224.61 million from $202.69 million in the year-ago period, aided by the increase in gross profit and lower operating expenses.
Fiscal Year 2009 Results
For fiscal year 2009, AmerisourceBergen's net income more than doubled to $503.40 million or $1.66 per share from $250.56 million or $0.77 per share in the previous year. Analysts expected the company to report earnings of $1.65 per share for the year.
Income from continuing operations for the year increased to $511.85 million or $1.69 per share from $469.06 million or $1.44 per share in the previous year.
Total revenue for the year increased 2.2% to $71.76 billion from $70.19 billion a year ago. Analysts had a consensus revenue estimate for the year of $71.09 billion.
In July, AmerisourceBergen had said it expects earnings from continuing operations for the full year to be at the higher end of its previously estimated range of $1.59 to $1.65 per share, and revenue growth of between 1% and 3%.
Outlook
For fiscal year 2010, AmerisourceBergen forecasts earnings per share in a range of $1.82-$1.92, representing an increase of 8%-14% over income from continuing operations of $1.69 in fiscal year 2009. Analysts expect the company to report earnings of $1.84 per share for the year.
The company projects revenue growth for the year of between 5% and 7%, implying revenue in a range of $75.35 billion-$76.78 billion. Analysts expect revenues of $73.94 billion for the year.
Subject to the approval of the company's board of directors and market conditions, AmerisourceBergen expects to spend about $350 million to repurchase its common shares in fiscal year 2010.
Stock Quotes
ABC closed Monday's regular trading session at $22.51, up $0.36 or 1.63% on a volume of 4.00 million shares. In the past 52 weeks, the stock has been trading in a range of $13.33-$23.86.
For comments and feedback: editorial@rttnews.com