US-based healthcare provider AmerisourceBergen Corporation (NYSE: ABC) is expected to report its Q1 FY 2011 earnings on January 24, 2011. In the last four quarter ending September 30, 2010, AmerisourceBergen's reported earnings per share exceeded analysts estimate by margins in the range of 4.20 percent and 14.50 percent.
AmerisourceBergen Corp., one of the largest U.S. pharmaceutical distributors, began operation in August 2001, following the merger of Amerisource Health Corp. and Bergen Brunswig Corp. ABC accounted for the merger as an acquisition by Amerisource of Bergen. The company services both healthcare providers and pharmaceutical manufacturers in the pharmaceutical supply channel, the Company provides drug distribution and related services. The company acts as an intermediary, or middleman, between drug manufacturers and providers and ranks as the third-largest U.S. pharmaceutical distributor in the $250B pharmaceutical distribution industry. The company also provides pharmacy services to certain specialty drug patients. National and retail drugstore chains, independent community drugstores, and pharmacy departments of supermarkets and mass merchandisers account for its retail market segment (32% of FY2009 total revenue), while the hospital/acute care, mail order and specialty pharmaceuticals markets together comprise its institutional market segment (68%). Revenues generated from sales to pharmacy benefit manager Medco Health Solutions (MHS) accounted for 17% of its total revenue in FY2009.
AmerisourceBergen Corporation reported its FY2010 fourth quarter diluted earnings per share of $0.50 per share, an increase 13.6 percent, and revenue of $19.7 billion, an increase 5.3 percent, compared to the fourth quarter of FY2009. AmerisourceBergen's reported gross profit increased by 10.1 percent to $592.8 million and operating income increased by 10.50 percent to $248.20 million.
For the first quarter ending December 31, 2010, analysts' estimates of earnings range from the low of $0.52 per share to the high of $0.0.57 per share, compared to the consensus estimate of $0.0.54 per share or $0.52 per share in the year ago quarter. Analysts' revenue estimates for the first quarter range from a low of $19.34 billion to a high of $20.37 billion, compared to a consensus estimate of $19.92 billion or $19.34 billion in the same quarter a year ago. For the quarter ending December 31, 2010, the consensus EPS forecast has decreased from $0.55 per share estimated 90 days ago to $0.54 per share on January 6, 2011.
On November 11, 2010, the board of directors of AmerisourceBergen increased the company's quarterly dividend rate by 25 percent to $0.10 per common share from $0.08 per common share. The quarterly dividend of $0.10 per common share is payable December 6, 2010, to stockholders of record at the close of business on November 22, 2010.
In the fourth quarter FY2010, under the share repurchase program, the company repurchased shares of $120.1 million, and for the FY2010, the company repurchased shares of $470.4 million, above company's expectations. In September 2010, its board of directors approved a new program authorizing the company to purchase up to an additional $500 million of its outstanding shares of common stock. The company expects to purchase $400 million of its common stock in FY2011.
For FY2011, the company expects diluted earnings per share in FY2011 to be in the range of $2.31 to $2.41, a 7 percent to 12 percent increase over a base of $2.16, which represents the diluted earnings per share achieved in FY2010. Also, the company expects revenue growth of between 2 percent and 4 percent; operating margin growth in the low to mid single-digit basis points range; and free cash flow in the range of $625 million to $700 million, which includes capital expenditures in the $150 million range. Despite increased competitive pricing on certain product lines, I forecast FY2011 EPS at $2.35 per share, due to an anticipated robust wave of generic launches. ABC's strong focus on generic drugs and oncology, as well as its firm rein on operating costs could help it expand margins.
In the last 52 weeks, the stock has been trading in the range of $25.66 and $35.02. In the last one year, closing price of the stock edged up by $8.49 or 32.23%. Based on my EPS estimates and industry fundamentals, I set a one year target price of $38.5.
