AmerisourceBergen tops Q3 estimates, raises FY16 EPS view

On expectations of impressive third-quarter performance, beginning June 2016, the shares of the drug wholesale company AmerisourceBergen Corporation (NYSE: ABC) started rising from 12-month low of $73.30.

The company did not let down the investors. Last week, AmerisourceBergen, formed by the merger of Bergen Brunswig and AmeriSource in 2001, reported fiscal 2016 third-quarter results that beat the Wall Street estimates.

The share price, which ended Friday’s trading session at $89.35, is currently at the midpoint of the yearly low and high price of $73.31 and $108.18.

Considering the raise in the fiscal 2016 earnings guidance and the preliminary fiscal 2017 profit growth outlook, we believe that the share price would soon cross the $95 levels.

The Chesterbrook, Pennsylvania-based company reported fiscal 2016 third-quarter revenue of $36.88 billion, compared to $34.23 billion in the third-quarter last year. The Q3 revenue was higher than the Zacks estimate of $36.6 billion.

AmerisourceBergen

During the third-quarter, the net income of the market leader in the pharmaceutical distribution climbed 63.3% to $349.80 million, from $214.16 million in the third-quarter of 2015. On a per share basis, the quarterly earnings increased to $1.56 per share, from $0.89 per share last year.

Excluding costs, the third-quarter adjusted earnings of $312.83 million or $1.37 per share was higher than the prior year adjusted earnings of $277.53 million or $1.20 per share. The Zacks estimate for the third-quarter was $1.26 per share. AmerisourceBergen also raised its fiscal 2016 earnings forecast to a range of $5.52 to $5.57 per share, from the prior estimates of $5.44 to $5.54 per share. The company also anticipates the FY17 profit to grow between 4% and 6% above the raised FY16 earnings guidance.

Commenting on the performance, the Chairman and CEO Steven H. Collis stated that the contributions from the recent acquisitions, MWI Veterinary Supply Inc. and PharMEDium Healthcare Holdings Inc., enabled the company to report a strong revenue growth in the second-quarter. The top and bottom line growth and raise in the fiscal 2016 earnings outlook indicates that the stock would remain bullish in the fourth-quarter.

AmerisourceBergen also declared a quarterly dividend of $0.34 per share, payable on September 6, 2016.

The stock has made a bullish crossover last month by rising above the 50-day moving average of 83. The RSI, as the chart indicates, is ascending firmly above the reading of 50, thereby indicating the probability of an uptrend in the stock. Thus, we can anticipate the share price to reach the next resistance level of 98.

A one touch call option can be bought under the prevailing circumstances to take advantage of the predicted rise in the price of the stock. A target level of $95 or lower would be the ideal for the suggested call option trade. Likewise, a contract expiry date in the second week of September would benefit the binary option trader.