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Bill Gunderson

About the Author Bill Gunderson

Bill Gunderson is the CEO and Chief Market Strategist of Gunderson Capital Managment in San Diego, CA. He is also a professional money manager, former research analyst, author of Best Stocks Now, and developer of the Best Stocks Now smartphone app. He offers four free weeks to his weekly Best Stocks Now to Seeking Alpha readers. http://www.pwstreet.com He also hosts a daily stock market radio show on AM1000 KCEO from 7am-8am. http://www.kceoradio.com Bill has appeared on the Fox Business Channel and on Bloomberg radio numerous times. He has been published in Barron's, Forbes, TheStreet.com and numerous other publications i.e. Los Angeles Business Journal, San Diego Union Tribune, Phoenix Business Journal, Salem News, Rochester Business Journal, and many others.

AmerisourceBergen Seeing Its Fastest Growth In 5 Years


In an environment where many companies are missing their earnings estimates or guiding down due to external factors such as commodity exposure and currency impact, AmerisourceBergen Corporation (NYSE:ABC) just reported a pretty solid quarter, beating estimates by $0.17.

The company also upped its outlook for the year to $4.45-$4.55 from its prior view of $4.36-$4.50 and guided up revenues well above the Wall Street consensus. In fact, AmerisourceBergen is experiencing its best growth in 5 years.

AmerisourceBergen is a distributor of drugs and health supplies based in Chesterbrook, Pennsylvania. It runs 26 U.S. pharmaceutical distribution centers, 4 U.S. specialty distribution centers, and 2 Canadian distribution hubs, in order to maximize supply chain efficiency.

Much of the upward revision came about as a result of its announced acquisition of MWI Veterinary Supply (NASDAQ:MWIV) for $190 per share, which the company expects to add an additional $0.08 in earnings this year. I also was long the stock at the time the company announced the deal.

Three companies generate about 85-90% of all revenues in the wholesale drug distribution industry, AmerisourceBergen, Cardinal Health (NYSE:CAH), and McKesson Corp. (NYSE:MCK). While AmerisourceBergen is not the largest competitor, it does have the best revenue growth.

What are some of the other factors driving growth for AmerisourceBergen?

For one thing, AmerisourceBergen is reaping the benefits of its 10-year contract with Walgreens (NASDAQ:WBA) to provide branded and generic drug products. The company entered into a strategic agreement with Walgreens Boots Alliance in 2013 and clearly this relationship is paying off.

Yet another factor driving results is sales momentum related to the sale of products to treat hepatitis C. New hep-C treatments are now available from Gilead Sciences (NASDAQ:GILD), AbbVie (NYSE:ABBV), and Johnson & Johnson (NYSE:JNJ).

The stock hit a new high after rising on these strong earnings results.

ABC is bucking the trend of companies experiencing earnings difficulties and appears poised to outperform going forward.

So let’s take a closer look!

Data from Best Stocks Now app

AmerisourceBergen is a large-cap, $21 billion market capitalization company. Its risk profile is Conservative and I own it in my Conservative Growth portfolio.

Data from Best Stocks Now app

The company does not appear cheap on a valuation basis and rates a Value Grade of C+. But it is the growth story that makes the stock interesting. Its 5-year annual growth rate is 12.3%, but that growth is rapidly accelerating due to strong growth in generic drugs, its partnership with Walgreens, and new drug availability in the hep-C segment.

Data from Best Stocks Now app

ABC receives a Momentum Grade of A- and a Performance Grade of A. The stock has been a consistent outperformer relative to the Index. More recently, it is up more than 45% over the last year.

Data from Best Stocks Now app

The company is ranked #50 out of the more than 3,900 companies in the Best Stocks Now universe. It receives a rating of Strong Buy with a Stock Grade of A.

There are huge opportunities in the drug distribution segment given the growth in generics, new drug discoveries, and pharmacy alliances. AmerisourceBergen appears well positioned to capture these opportunities.