VALLEY FORGE, Pa. -- Buoyed by a strong operating performance and benefits from special items, AmerisourceBergen Corp. rang up a 30.4% jump in earnings from continuing operations on a 6.6% revenue gain in the fiscal 2010 third quarter.
Despite delivering results that exceeded Wall Street's expectations, the company's stock took a hit as investors were disappointed with management's forecast for fourth quarter earnings (see accompanying story).
The drug wholesaler posted net income of $163.2 million, or 57 cents per diluted share, for the three months ended June 30, up from the $125.1 million, or 42 cents, earned by continuing operations a year ago. Including a $6.33 million loss from discontinued operations in the 2009 period, net income bounded 37.3% from $118.8 million.
Third quarter revenue, meanwhile, climbed to $19.6 billion from $18.39 billion.
Management reported that revenue grew 8% at the core AmerisourceBergen Drug Corp., "aided by above-market growth by its largest customers," while the AmerisourceBergen Specialty Group turned in a 3% gain.
Excluding a 5 cent-per-share benefit from special items, the company posted adjusted earnings of 52 cents per share--beating the average estimate of 49 cents among analysts polled by Thomson Reuters. Revenue also topped analysts' $19.34 billion forecast.
"This outstanding performance in the third quarter reflects the strength of our key growth drivers--generic pharmaceuticals and specialty distribution and services," AmerisourceBergen president and chief executive officer R. David Yost said in a statement.
"Our strong revenue growth and generic drug performance combined with disciplined working capital and expense management to deliver our results. Our balance sheet remains strong, and we have excellent financial flexibility."
On the income side in the quarter, gross margin widened by 18 basis points to 3%, due primarily to the impact of strong sales in generic pharmaceuticals as well as a $19.1 million benefit from an antitrust litigation settlement, according to AmerisourceBergen.
Concurrently, total operating expenses dropped 10 basis points to 1.56% of revenue, as the core component--distribution, selling and administrative costs--fell 3 basis points to 1.48% of revenue, and depreciation and amortization held steady at 0.11%. The balance of the improvement emanated from the presence of an $8.9 million impairment charge in the 2009 quarter and a swing to a $4.4 million gain from a year-ago $213,000 charge for facility consolidations, employee severance and other costs.
"The lower [expense] ratio demonstrates the company's ability to leverage its existing infrastructure and its focus on productivity and efficiency," AmerisourceBergen's management commented.
All of these positive factors paved the way for a 32.3% jump in third quarter operating income to $281.9 million, or 1.44% of sales--up from a 1.16% operating ratio a year ago. Backing out the special items in both years, adjusted operating profit grew at a healthy 16% pace to $257.6 million.
After the inclusion of a 22.2% increase in net interest expense to $17.9 million, pretax earnings from ongoing lines grew 33% to $263.5 million. For the first nine months, AmerisourceBergen netted $495.5 million, or $1.72 per diluted share, up 29.8% from the $381.7 million generated by continuing operations a year ago. Including $8.46 million in losses from discontinued operations in the 2009 span, net income surged 32.7% from $373.3 million.
Year-to-date revenue climbed 9.8% to $58.24 billion from $53.04 billion, while operating profit jumped 29.8% to $855.5 million. Excluding special items in both years, adjusted operating profit advanced by 23.2% to $831 million.
Current Previous close close Net %Chain drug stocks 8/31/10 8/13/10 change changeDow Jones Composite Average 3482.29 3551.67 -123.38 -3.47CVS Caremark 26.98 28.70 -1.72 -5.99Rite Aid 0.87 0.95 -0.08 -8.42Walgreens 26.88 28.17 -1.29 -4.58 52-week 52-week P/EChain drug stocks high low Div. Yield ratioDow Jones Composite Average 3885.78 3161.38CVS Caremark 38.27 26.84 0.35 1.3 11.0Rite Aid 2.35 0.86 -- -- --Walgreens 40.69 26.26 0.70 2.6 13.0 Current Previous close close Net %Canadian drug stocks * 8/31/10 8/13/10 change changeJean Coutu Group 8.75 8.80 -0.05 -0.57Shoppers Drug Mart 36.31 35.09 +1.22 +3.48 52-week 52-week P/ECanadian drug stocks * high low Div. Yield ratioJean Coutu Group 10.24 7.88 0.22 2.5 14.0Shoppers Drug Mart 46.35 32.57 0.90 2.5 13.0* Figures are in Canadian dollars. Current Previous close close Net %Internet drug stores 8/31/10 8/13/10 change changedrugstore.com 1.57 1.89 -0.32 -16.93 52-week 52-week P/EInternet drug stores high low Div. Yield ratiodrugstore.com 3.95 1.49 -- -- -- Current PreviousParent companies & close close Net %combo operators 8/31/10 8/13/10 change changeAhold (combos) 12.20 12.50 -0.30 -2.40AmerisourceBergen (GNP) 27.28 29.04 -1.76 -6.06A&P (combos) 3.04 2.95 +0.09 +3.05Cardinal Health (Medicine shoppe) 29.96 31.36 -1.40 -4.46Kroger(combos) 19.73 22.00 -2.27 -10.32McKesson (Health Mart) 58.05 60.65 -2.60 -4.29Supervalu (combos) 9.72 10.99 -1.27 -11.56Parent companies & 52-week 52-week PPEcombo operators high low Div. Yield ratioAhold (combos) 14.31 11.62 -- -- --AmerisourceBergen (GNP) 33.27 20.87 0.32 1.2 13.0A&P (combos) 13.00 2.50 -- -- --Cardinal Health (Medicine shoppe) 36.66 24.87 0.78 2.6 17.0Kroger(combos) 24.80 19.08 0.38 1.9 --McKesson (Health Mart) 71.49 54.60 0.72 1.2 13.0Supervalu (combos) 17.89 9.67 0.35 3.5 6.0 Current Previous close close Net %Other retailers 8/31/10 8/13/10 change changeSears (Kmart) 61.96 66.55 -4.59 -6.90Target 51.16 50.81 +0.35 +0.69Walmart 50.14 50.40 -0.26 -0.52 52-week 52-week P/EOther retailers high low Div. Yield ratioSears (Kmart) 125.42 59.21 -- -- 26.0Target 58.52 45.11 1.00 2.0 14.0Walmart 56.27 47.77 1.21 2.4 13.0
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