Understanding AmerisourceBergen’s Newly Added Risk Factors


This article was originally published on TipRanks.com

Pennsylvania-based AmerisourceBergen (ABC) is a distributor of drugs and other healthcare products.

Let’s take a look at the company’s latest financial performance and understand its newly added risk factors. (See Top Smart Score Stocks on TipRanks)

Q4 Financial Results

For the fourth-quarter of fiscal 2021, AmerisourceBergen reported a 19.6% year-over-year increase in revenue to $58.9 million. The consensus estimate for the same stood at $57.3 billion. It posted adjusted EPS of $2.39, beating the consensus estimate of $2.36. (See AmerisourceBergen stock charts on TipRanks).

Risk Factors

According to the new TipRanks’ Risk Factors tool, AmerisourceBergen’s main risk categories are Finance and Corporate and Legal and Regulatory, each accounting for 28% of the total 29 risk factors identified for the stock. The company recently updated its profile with four new risks.

Under the Finance & Corporate risk category, AmerisourceBergen tells investors that together with other pharmaceutical distributors it has negotiated a settlement agreement related to the opioid lawsuits. It has recorded a charge of more than $6.7 billion in connection with the proposed settlement. It, however, cautions that the opioid litigation matters are still developing and that the outcome could include excessive monetary obligation.

Under the Production risk category, the company has informed investors that about 27% of its employees belong to unions. It cautions that the unionized workers could decide to engage in strikes in negotiation for new collective bargain agreements. Should there be labor strikes, the company warns that its operations could be disrupted and financial results adversely affected.

Under the Political and Macro risk category, AmerisourceBergen cautions that changes in forex rates could increase its costs and reduce its revenue. While it may enter into certain contracts to offset the potential adverse impact from unfavorable forex rates movements, the company observes that such forex hedging tactics may not be successful.

The Finance and Corporate risk factor’s sector average is 29%, compared to AmerisourceBergen’s 28%. The Legal and Regulatory risk factor’s sector average is 20%, compared to AmerisourceBergen’s 28%. Shares of the company have gained about 23% year-to-date.

Analyst’s Take

Following AmerisourceBergen’s fourth-quarter earnings report, Deutsche Bank analyst George Hill maintained a Hold rating on AmerisourceBergen stock but raised the price target to $153 from $136. Hill’s new price target suggests 27.26% upside potential.

Overall, the Street has a Moderate Buy consensus rating based on 5 Buys and 3 Holds. The average AmerisourceBergen price target of $146.88 implies 22.17% upside potential.

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