AmerisourceBergen Q1 Profit Falls, But Revenues Beat; Reaffirms Earnings Outlook

(RTTNews) - Pharmaceutical services company AmerisourceBergen Corp. (ABC) on Thursday reported a 75 percent decline in profit for the first quarter from last year, as higher expenses associated with the company's distribution agreement with drugstore chain Walgreen Co. (WAG) and Alliance Boots GmbH more than offset strong revenue growth.

Revenue for the quarter beat analysts' estimates. Looking ahead to fiscal 2014, the company reiterated its earnings outlook and raised its revenue growth forecast.

AmerisourceBergen's first-quarter net income was $41.39 million or $0.17 per share, down from $168.61 million or $0.71 per share in the year-ago quarter.

The latest quarter's results includes, among other items, a gain of $0.06 per share from antitrust litigation settlements, LIFO expense charge of $0.15 per share and warrant expense of $0.47 per share. The prior-year quarter's results include a gain of $0.03 per share from antitrust litigation and LIFO expense charge of $0.01 per share.

Excluding items, adjusted income from continuing operations for the quarter was $188.18 million or $0.80 per share, compared to $172.73 million or $0.73 per share in the year-ago quarter.

On average, 15 analysts polled by Thomson Reuters expected the company to report earnings of $0.78 per share for the quarter. Analysts' estimates typically exclude special items.

Revenue for the quarter grew 39 percent to $29.18 billion from $21.06 billion in the same period last year and beat analysts' consensus revenue estimate of $27.43 billion.

Gross margin for the quarter decreased to 2.36 percent from 3.14 percent in the year-ago period, while operating margin decreased to 0.55 percent from 1.42 percent last year.

Total operating expenses surged 46 percent from last year to $528.61 million. The increase in operating expenses was due primarily to costs associated with onboarding the new Walgreen Co. business. The company recorded warrants of $116.30 million in the quarter.

AmerisourceBergen's pharmaceutical distribution segment revenues for the quarter rose 39 percent from last year to $28.63 billion. The segment includes both AmerisourceBergen Drug Corp or ABDC, and AmerisourceBergen Specialty Group or ABSG.

Of this, ABDC revenues increased 46 percent, due primarily to the onboarding of the new Walgreens branded pharmaceuticals business and increased sales to the company's large PBM customer as well as other large customers.

In March 2013, Walgreen and its partner Alliance Boots GmbH announced a ten-year pharmaceutical distribution agreement with AmerisourceBergen.

ABSG revenues for the quarter increased 8 percent, driven by strong performance in the company's blood products, vaccine and physician office distribution businesses.

Revenues in the "other" segment rose 20 percent from the prior-year quarter to $604.13 million. The segment includes AmerisourceBergen Consulting Services or ABCS, and World Courier.

Looking ahead to fiscal 2014, AmerisourceBergen reaffirmed its outlook for adjusted earnings per share from continuing operations in the range of $3.60 to $3.73. The company increased its revenue growth expectations to a range of 30 percent to 34 percent, from the prior range of 28 percent to 31 percent.

Street expects the company to report earnings of $3.69 per share for the year on revenues of $114.30 billion.

In Thursday's regular session, ABC is trading at $70.63, up $0.35 or 0.50 percent on a volume of 183,695 shares.