AmerisourceBergen quarterly results: what industry downturn?

AmerisourceBergen Corp. (ABC) is winning the expectations game on Wall Street: although its quarterly revenues were a shade under analyst estimates (coming in at $37.6 billion, versus $37.85 billion expected), earnings per share for the year beat expectations, reaching $1.30, 7 cts above expected. When McKesson reported disappointing revenues and earnings last week, the market erased 23% of its stock value (ABC took a hit, too); on Nov. 2 when ABC reported its results, the stock jumped 8.8% on the day.

Like McKesson and Cardinal Health, ABC is reducing its expectations for the coming year, saying that revenue will grow between 6.5 and 8%, and earnings per share in the range of $5.63 to 5.88. (Analyst expectations, according to press reports, are 8% revenue growth and EPS of $5.82.)

For the 2016 fiscal year now ending for the company, ABC rang up $146.8 billion in revenue, boosted in part by acquisitions of PharMedium, a compounding pharmacy business, and MWI, a veterinary products distributor. CEO Steve Collis calls the year one of “solid performance.”

In the company’s analysts call, Collis made special note of the marketplace trends in pharma distribution, ABC’s main business: “While it is true that we have said we expect our revenue growth to exceed the overall market growth rate, that growth is driven by our outstanding mix of customers, many of who are expected to grow faster than the market, and by our footprint in specialty, which also grows faster than the overall market,” he said. “These two elements provide the organic growth that is the primary driver of our business.”

Collis made specific reference to the independent pharmacy market, saying that “We have deliberately chosen to work more with our established and proven relationships than to go and win new relationships that are not profitable or strategically relevant to our offering.” On more or less the same topic, McKesson’s CEO, John Hammergren, stated that “Our customers believe we've been charging fairly for the service we provide and are willing to pay for this service. When a competitor significantly undercuts our existing pricing, we are compelled to respond.” All this highfalutin’ language only barely covers what must be a hotly competitive scramble for business among these wholesalers.