Analyst Note| Soo Romanoff |
Narrow-moat AmerisourceBergen Corp. reported stronger-than-expected third-quarter results relative to recently lowered guidance amid the coronavirus pandemic. Reported operating results were almost identical to the prior year (with minor exceptions with taxes and share count) and likely reflects the inelastic demand for drugs along with somewhat heightened reliance on supply chain partners with notable scale during the pandemic. Management noted stabilization in the business in June and somewhat of a volume pick-up in July, which resonates with observations from other companies under our coverage. With the stabilization of volumes, management confidently revised its full-year normalized EPS range to $7.80-$7.95, similar to the $7.55-$7.80 range provided earlier in the year. Incorporating the revised guidance and anticipated stabilization, we have increased fourth-quarter results to match the high end of the guidance range, which in turn pushes up our fair value estimate to $110 from $95 per share.