Intrinsic value of AmerisourceBergen - ABC

Previous Close

$102.81

  Intrinsic Value

$90.09

stock screener

  Rating & Target

hold

-12%

Previous close

$102.81

 
Intrinsic value

$90.09

 
Up/down potential

-12%

 
Rating

hold

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of ABC stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  4.29
  4.20
  4.28
  4.35
  4.42
  4.48
  4.53
  4.57
  4.62
  4.66
  4.69
  4.72
  4.75
  4.77
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
Revenue, $m
  153,144
  159,576
  166,406
  173,648
  181,318
  189,432
  198,008
  207,067
  216,628
  226,713
  237,346
  248,552
  260,355
  272,785
  285,869
  299,640
  314,128
  329,369
  345,398
  362,253
  379,974
  398,603
  418,185
  438,764
  460,392
  483,117
  506,996
  532,083
  558,440
  586,128
  615,214
Variable operating expenses, $m
 
  157,955
  164,690
  171,830
  179,393
  187,394
  195,851
  204,784
  214,211
  224,156
  234,641
  245,085
  256,724
  268,980
  281,883
  295,461
  309,747
  324,775
  340,581
  357,201
  374,675
  393,044
  412,352
  432,645
  453,971
  476,379
  499,925
  524,663
  550,652
  577,954
  606,634
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  152,083
  157,955
  164,690
  171,830
  179,393
  187,394
  195,851
  204,784
  214,211
  224,156
  234,641
  245,085
  256,724
  268,980
  281,883
  295,461
  309,747
  324,775
  340,581
  357,201
  374,675
  393,044
  412,352
  432,645
  453,971
  476,379
  499,925
  524,663
  550,652
  577,954
  606,634
Operating income, $m
  1,060
  1,621
  1,716
  1,817
  1,924
  2,038
  2,157
  2,283
  2,417
  2,557
  2,706
  3,466
  3,631
  3,804
  3,987
  4,179
  4,381
  4,594
  4,817
  5,052
  5,299
  5,559
  5,832
  6,119
  6,421
  6,738
  7,071
  7,421
  7,788
  8,175
  8,580
EBITDA, $m
  1,492
  2,421
  2,525
  2,634
  2,751
  2,874
  3,004
  3,141
  3,286
  3,439
  3,601
  3,771
  3,950
  4,138
  4,337
  4,546
  4,766
  4,997
  5,240
  5,496
  5,765
  6,047
  6,344
  6,657
  6,985
  7,329
  7,692
  8,072
  8,472
  8,892
  9,333
Interest expense (income), $m
  125
  132
  48
  94
  143
  195
  250
  308
  369
  434
  502
  574
  650
  730
  814
  902
  995
  1,093
  1,196
  1,305
  1,419
  1,539
  1,665
  1,797
  1,936
  2,082
  2,236
  2,398
  2,567
  2,745
  2,933
Earnings before tax, $m
  918
  1,489
  1,668
  1,723
  1,781
  1,842
  1,907
  1,975
  2,048
  2,124
  2,204
  2,892
  2,981
  3,075
  3,173
  3,277
  3,386
  3,500
  3,621
  3,747
  3,881
  4,021
  4,168
  4,322
  4,485
  4,655
  4,835
  5,023
  5,221
  5,429
  5,647
Tax expense, $m
  554
  402
  450
  465
  481
  497
  515
  533
  553
  573
  595
  781
  805
  830
  857
  885
  914
  945
  978
  1,012
  1,048
  1,086
  1,125
  1,167
  1,211
  1,257
  1,305
  1,356
  1,410
  1,466
  1,525
Net income, $m
  364
  1,087
  1,218
  1,258
  1,300
  1,345
  1,392
  1,442
  1,495
  1,550
  1,609
  2,111
  2,176
  2,245
  2,316
  2,392
  2,472
  2,555
  2,643
  2,736
  2,833
  2,935
  3,042
  3,155
  3,274
  3,398
  3,529
  3,667
  3,811
  3,963
  4,123

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,435
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  35,316
  34,258
  35,725
  37,279
  38,926
  40,668
  42,509
  44,454
  46,507
  48,672
  50,955
  53,360
  55,894
  58,563
  61,372
  64,328
  67,438
  70,710
  74,152
  77,770
  81,575
  85,574
  89,778
  94,196
  98,839
  103,718
  108,844
  114,230
  119,888
  125,833
  132,077
Adjusted assets (=assets-cash), $m
  32,881
  34,258
  35,725
  37,279
  38,926
  40,668
  42,509
  44,454
  46,507
  48,672
  50,955
  53,360
  55,894
  58,563
  61,372
  64,328
  67,438
  70,710
  74,152
  77,770
  81,575
  85,574
  89,778
  94,196
  98,839
  103,718
  108,844
  114,230
  119,888
  125,833
  132,077
Revenue / Adjusted assets
  4.658
  4.658
  4.658
  4.658
  4.658
  4.658
  4.658
  4.658
  4.658
  4.658
  4.658
  4.658
  4.658
  4.658
  4.658
  4.658
  4.658
  4.658
  4.658
  4.658
  4.658
  4.658
  4.658
  4.658
  4.658
  4.658
  4.658
  4.658
  4.658
  4.658
  4.658
Average production assets, $m
  4,565
  4,787
  4,992
  5,209
  5,440
  5,683
  5,940
  6,212
  6,499
  6,801
  7,120
  7,457
  7,811
  8,184
  8,576
  8,989
  9,424
  9,881
  10,362
  10,868
  11,399
  11,958
  12,546
  13,163
  13,812
  14,494
  15,210
  15,963
  16,753
  17,584
  18,456
Working capital, $m
  -2,515
  -5,106
  -5,325
  -5,557
  -5,802
  -6,062
  -6,336
  -6,626
  -6,932
  -7,255
  -7,595
  -7,954
  -8,331
  -8,729
  -9,148
  -9,588
  -10,052
  -10,540
  -11,053
  -11,592
  -12,159
  -12,755
  -13,382
  -14,040
  -14,733
  -15,460
  -16,224
  -17,027
  -17,870
  -18,756
  -19,687
Total debt, $m
  3,794
  1,375
  2,694
  4,094
  5,575
  7,143
  8,800
  10,551
  12,398
  14,347
  16,401
  18,566
  20,847
  23,248
  25,777
  28,437
  31,237
  34,181
  37,278
  40,535
  43,959
  47,559
  51,342
  55,318
  59,497
  63,888
  68,502
  73,349
  78,442
  83,791
  89,411
Total liabilities, $m
  33,252
  30,833
  32,152
  33,552
  35,033
  36,601
  38,258
  40,009
  41,856
  43,805
  45,859
  48,024
  50,305
  52,706
  55,235
  57,895
  60,695
  63,639
  66,736
  69,993
  73,417
  77,017
  80,800
  84,776
  88,955
  93,346
  97,960
  102,807
  107,900
  113,249
  118,869
Total equity, $m
  2,064
  3,426
  3,572
  3,728
  3,893
  4,067
  4,251
  4,445
  4,651
  4,867
  5,095
  5,336
  5,589
  5,856
  6,137
  6,433
  6,744
  7,071
  7,415
  7,777
  8,157
  8,557
  8,978
  9,420
  9,884
  10,372
  10,884
  11,423
  11,989
  12,583
  13,208
Total liabilities and equity, $m
  35,316
  34,259
  35,724
  37,280
  38,926
  40,668
  42,509
  44,454
  46,507
  48,672
  50,954
  53,360
  55,894
  58,562
  61,372
  64,328
  67,439
  70,710
  74,151
  77,770
  81,574
  85,574
  89,778
  94,196
  98,839
  103,718
  108,844
  114,230
  119,889
  125,832
  132,077
Debt-to-equity ratio
  1.838
  0.400
  0.750
  1.100
  1.430
  1.760
  2.070
  2.370
  2.670
  2.950
  3.220
  3.480
  3.730
  3.970
  4.200
  4.420
  4.630
  4.830
  5.030
  5.210
  5.390
  5.560
  5.720
  5.870
  6.020
  6.160
  6.290
  6.420
  6.540
  6.660
  6.770
Adjusted equity ratio
  -0.011
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  364
  1,087
  1,218
  1,258
  1,300
  1,345
  1,392
  1,442
  1,495
  1,550
  1,609
  2,111
  2,176
  2,245
  2,316
  2,392
  2,472
  2,555
  2,643
  2,736
  2,833
  2,935
  3,042
  3,155
  3,274
  3,398
  3,529
  3,667
  3,811
  3,963
  4,123
Depreciation, amort., depletion, $m
  432
  800
  808
  817
  826
  836
  847
  858
  870
  882
  895
  304
  319
  334
  350
  367
  385
  403
  423
  444
  465
  488
  512
  537
  564
  592
  621
  652
  684
  718
  753
Funds from operations, $m
  1,971
  1,887
  2,026
  2,075
  2,127
  2,181
  2,239
  2,300
  2,364
  2,432
  2,504
  2,416
  2,495
  2,579
  2,666
  2,759
  2,856
  2,959
  3,066
  3,179
  3,298
  3,423
  3,554
  3,693
  3,838
  3,990
  4,150
  4,318
  4,495
  4,681
  4,876
Change in working capital, $m
  467
  -206
  -219
  -232
  -245
  -260
  -274
  -290
  -306
  -323
  -340
  -359
  -378
  -398
  -419
  -441
  -464
  -488
  -513
  -539
  -567
  -596
  -627
  -659
  -692
  -727
  -764
  -803
  -843
  -886
  -931
Cash from operations, $m
  1,504
  2,092
  2,245
  2,307
  2,372
  2,441
  2,514
  2,590
  2,670
  2,755
  2,844
  2,774
  2,873
  2,976
  3,085
  3,200
  3,320
  3,446
  3,579
  3,719
  3,865
  4,019
  4,181
  4,351
  4,530
  4,717
  4,914
  5,121
  5,339
  5,567
  5,807
Maintenance CAPEX, $m
  0
  -186
  -195
  -204
  -213
  -222
  -232
  -242
  -254
  -265
  -278
  -291
  -304
  -319
  -334
  -350
  -367
  -385
  -403
  -423
  -444
  -465
  -488
  -512
  -537
  -564
  -592
  -621
  -652
  -684
  -718
New CAPEX, $m
  -466
  -222
  -205
  -217
  -230
  -243
  -257
  -272
  -287
  -303
  -319
  -336
  -354
  -373
  -393
  -413
  -435
  -457
  -481
  -506
  -532
  -559
  -587
  -617
  -649
  -682
  -716
  -753
  -791
  -831
  -873
Cash from investing activities, $m
  -498
  -408
  -400
  -421
  -443
  -465
  -489
  -514
  -541
  -568
  -597
  -627
  -658
  -692
  -727
  -763
  -802
  -842
  -884
  -929
  -976
  -1,024
  -1,075
  -1,129
  -1,186
  -1,246
  -1,308
  -1,374
  -1,443
  -1,515
  -1,591
Free cash flow, $m
  1,006
  1,684
  1,844
  1,886
  1,929
  1,976
  2,024
  2,076
  2,130
  2,187
  2,247
  2,148
  2,214
  2,285
  2,359
  2,436
  2,518
  2,604
  2,695
  2,790
  2,890
  2,995
  3,106
  3,222
  3,344
  3,472
  3,606
  3,748
  3,896
  4,052
  4,216
Issuance/(repayment) of debt, $m
  -750
  -2,407
  1,320
  1,399
  1,482
  1,568
  1,657
  1,750
  1,847
  1,949
  2,054
  2,165
  2,281
  2,402
  2,528
  2,661
  2,799
  2,945
  3,097
  3,257
  3,424
  3,599
  3,783
  3,976
  4,179
  4,391
  4,614
  4,847
  5,093
  5,350
  5,620
Issuance/(repurchase) of shares, $m
  -227
  2,698
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -993
  291
  1,320
  1,399
  1,482
  1,568
  1,657
  1,750
  1,847
  1,949
  2,054
  2,165
  2,281
  2,402
  2,528
  2,661
  2,799
  2,945
  3,097
  3,257
  3,424
  3,599
  3,783
  3,976
  4,179
  4,391
  4,614
  4,847
  5,093
  5,350
  5,620
Total cash flow (excl. dividends), $m
  13
  1,975
  3,164
  3,285
  3,411
  3,543
  3,681
  3,826
  3,977
  4,136
  4,302
  4,313
  4,495
  4,686
  4,887
  5,097
  5,318
  5,549
  5,792
  6,047
  6,314
  6,595
  6,889
  7,198
  7,522
  7,863
  8,220
  8,595
  8,989
  9,402
  9,836
Retained Cash Flow (-), $m
  65
  -3,785
  -147
  -155
  -165
  -174
  -184
  -194
  -205
  -217
  -228
  -241
  -253
  -267
  -281
  -296
  -311
  -327
  -344
  -362
  -380
  -400
  -420
  -442
  -464
  -488
  -513
  -539
  -566
  -594
  -624
Prev. year cash balance distribution, $m
 
  2,423
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  613
  3,017
  3,129
  3,247
  3,369
  3,497
  3,631
  3,772
  3,919
  4,074
  4,072
  4,242
  4,419
  4,606
  4,801
  5,007
  5,222
  5,448
  5,685
  5,934
  6,195
  6,469
  6,756
  7,058
  7,375
  7,707
  8,057
  8,423
  8,808
  9,212
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  587
  2,762
  2,723
  2,673
  2,611
  2,538
  2,453
  2,358
  2,251
  2,136
  1,934
  1,810
  1,680
  1,546
  1,410
  1,272
  1,136
  1,003
  875
  754
  641
  537
  443
  359
  287
  225
  173
  130
  96
  69
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

AmerisourceBergen Corporation is a pharmaceutical sourcing and distribution services company. The Company's segments include Pharmaceutical Distribution and Other. The Company provides services to healthcare providers, and pharmaceutical and biotech manufacturers. As of June 30, 2016, the Pharmaceutical Distribution segment consists of two operating segments, including the operations of AmerisourceBergen Drug Corporation (ABDC) and AmerisourceBergen Specialty Group (ABSG), which distributes specialty drugs to their customers. Servicing healthcare providers in the pharmaceutical supply channel, the Pharmaceutical Distribution segment's operations provide drug distribution and related services. The Other segment consists of the operations of various segments, including the AmerisourceBergen Consulting Services (ABCS), the World Courier Group, Inc. and the MWI Veterinary Supply, Inc. ABSG operates distribution facilities that focus primarily on complex disease treatment regimens.

FINANCIAL RATIOS  of  AmerisourceBergen (ABC)

Valuation Ratios
P/E Ratio 61.6
Price to Sales 0.1
Price to Book 10.9
Price to Tangible Book
Price to Cash Flow 14.9
Price to Free Cash Flow 21.6
Growth Rates
Sales Growth Rate 4.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0.2%
Cap. Spend. - 3 Yr. Gr. Rate 12%
Financial Strength
Quick Ratio 203
Current Ratio 0
LT Debt to Equity 183.2%
Total Debt to Equity 183.8%
Interest Coverage 8
Management Effectiveness
Return On Assets 1.2%
Ret/ On Assets - 3 Yr. Avg. 1.8%
Return On Total Capital 5.8%
Ret/ On T. Cap. - 3 Yr. Avg. 9.5%
Return On Equity 17.4%
Return On Equity - 3 Yr. Avg. 36.9%
Asset Turnover 4.4
Profitability Ratios
Gross Margin 3%
Gross Margin - 3 Yr. Avg. 2.8%
EBITDA Margin 1%
EBITDA Margin - 3 Yr. Avg. 0.9%
Operating Margin 0.7%
Oper. Margin - 3 Yr. Avg. 0.7%
Pre-Tax Margin 0.6%
Pre-Tax Margin - 3 Yr. Avg. 0.6%
Net Profit Margin 0.2%
Net Profit Margin - 3 Yr. Avg. 0.4%
Effective Tax Rate 60.3%
Eff/ Tax Rate - 3 Yr. Avg. 69.7%
Payout Ratio 87.9%

ABC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ABC stock intrinsic value calculation we used $153144 million for the last fiscal year's total revenue generated by AmerisourceBergen. The default revenue input number comes from 2017 income statement of AmerisourceBergen. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ABC stock valuation model: a) initial revenue growth rate of 4.2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for ABC is calculated based on our internal credit rating of AmerisourceBergen, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of AmerisourceBergen.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ABC stock the variable cost ratio is equal to 99%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for ABC stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for AmerisourceBergen.

Corporate tax rate of 27% is the nominal tax rate for AmerisourceBergen. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ABC stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ABC are equal to 3%.

Life of production assets of 24.5 years is the average useful life of capital assets used in AmerisourceBergen operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ABC is equal to -3.2%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $2064 million for AmerisourceBergen - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 219.887 million for AmerisourceBergen is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of AmerisourceBergen at the current share price and the inputted number of shares is $22.6 billion.

Management's discussion and analysis

We are one of the largest global pharmaceutical sourcing and distribution services companies, helping both healthcare providers and pharmaceutical and biotech manufacturers improve patient access to products and enhance patient care. We deliver innovative programs and services designed to increase the effectiveness and efficiency of the pharmaceutical supply chain in both human and animal health. We are organized based upon the products and services we provide to our customers. Our operations are comprised of the Pharmaceutical Distribution reportable segment and Other.

Pharmaceutical Distribution Segment

The Pharmaceutical Distribution reportable segment is comprised of two operating segments, which include the operations of ABDC and ABSG. Servicing healthcare providers in the pharmaceutical supply channel, the Pharmaceutical Distribution segment's operations provide drug distribution and related services designed to reduce healthcare costs and improve patient outcomes.
ABDC distributes a comprehensive offering of brand-name and generic pharmaceuticals (including specialty pharmaceutical products), over-the-counter healthcare products, home healthcare supplies and equipment, outsourced CSPs, and related services to a wide variety of healthcare providers, including acute care hospitals and health systems, independent and chain retail pharmacies, mail order pharmacies, medical clinics, long-term care and alternate site pharmacies, and other customers. ABDC also provides pharmacy management, staffing and additional consulting services, and supply management software to a variety of retail and institutional healthcare providers. Additionally, ABDC delivers packaging solutions to institutional and retail healthcare providers.
ABSG, through a number of operating businesses, provides pharmaceutical distribution and additional services to physicians who specialize in a variety of disease states, especially oncology, and to other healthcare providers, including hospitals and dialysis clinics. ABSG also distributes plasma and other blood products, injectible pharmaceuticals, vaccines, and other specialty products. Additionally, ABSG provides third party logistics, outcomes research, and additional services for biotechnology and pharmaceutical manufacturers.
Our use of the term "specialty" and "specialty pharmaceutical products" refers to drugs used to treat complex diseases, such as cancer, diabetes, and multiple sclerosis. Specialty pharmaceutical products are part of complex treatment regimens for serious conditions and diseases that generally require ongoing clinical monitoring. We believe the terms "specialty" and "specialty pharmaceutical products" are used consistently by industry participants and our competitors. However, we cannot be certain that other distributors of specialty products define these and other similar terms in exactly the same manner as we do.
Both ABDC and ABSG distribute specialty drugs to their customers, with the principal difference between these two operating segments being that ABSG operates distribution facilities that focus primarily on complex disease treatment regimens. Therefore, a product distributed from one of ABSG's distribution facilities results in revenue reported under ABSG, and a product distributed from one of ABDC's distribution centers results in revenue reported under ABDC. Essentially all of ABSG's sales consist of specialty pharmaceutical products. ABDC's sales of specialty pharmaceutical products have historically been a relatively small component of its overall revenue.

Other

Other consists of the ABCS operating segment, the World Courier operating segment, and the MWI operating segment. The results of operations of these operating segments are not significant enough to require separate reportable segment disclosure, and therefore, have been included in "Other" for the purpose of our reportable segment presentation.
ABCS, through a number of operating businesses, provides commercialization support services including reimbursement support programs, outcomes research, contract field staffing, patient assistance and co-pay assistance programs, adherence programs, risk mitigation services, and other market access programs to pharmaceutical and biotechnology manufacturers. World Courier, which operates in over 50 countries, is a leading global specialty transportation and logistics provider for the biopharmaceutical industry. MWI is a leading animal health distribution company in the United States and in the United Kingdom. MWI sells pharmaceuticals, vaccines, parasiticides, diagnostics, micro feed ingredients, and various other products to customers in both the companion animal and production animal markets.

Recent Developments

In August 2016, we and WBA amended the 2017 Warrants so that they became exercisable in whole or in part during the six month period beginning in August 2016 at an exercise price of $52.50. In August 2016, WBA exercised the 2017 Warrants and purchased 22,696,912 shares of our Common Stock for $1,191.6 million. The earnings per share dilutive effect of the exercise of the Warrants was fully mitigated by our hedging a portion of our obligation to deliver common stock with a financial institution and repurchasing additional shares of our Common Stock under special share repurchase programs for our own account over time.
In November 2016, our board of directors authorized a new share repurchase program allowing us to purchase up to $1.0 billion in shares of our Common Stock, subject to market conditions.

Executive Summary

This executive summary provides highlights from the results of operations that follow:
   
Revenue increased 8.0% from the prior fiscal year as a result of ABDC's increased sales of brand and generic products and the strong revenue growth of ABSG. The addition of MWI, which was acquired in February 2015, also contributed to the revenue growth in the current fiscal year;
   
Pharmaceutical Distribution gross profit increased 2.9% from the prior fiscal year as the result of the contribution from our recent PharMEDium acquisition and segment revenue growth. Gross profit growth in the current fiscal year benefited from the incremental income from ABDC's participation in the WBA global sourcing arrangement and was adversely impacted by lower generic price appreciation, an increase in generic price deflation, and contract renewals with the Department of Defense ("DOD"), a significant GPO customer, and Kaiser Permanente ("Kaiser"), at less favorable terms;
   
Total gross profit increased 21.1% from the prior fiscal year primarily due to the addition of MWI, a reduction in LIFO expense, which was $200.2 million in the current fiscal year in comparison to $542.8 million in the prior fiscal year, and an increased gain from antitrust litigation settlements, which was $133.8 million in the current fiscal year in comparison to $65.5 million in the prior fiscal year;
   
Distribution, selling, and administrative expenses increased 9.6% from the prior fiscal year, primarily due to the addition of MWI, and to a lesser extent, PharMEDium;
   
Total operating expenses were impacted by Warrants. Warrants expense was $140.3 million in the current fiscal year compared $912.7 million in the prior fiscal year. Warrants expense decreased significantly from the prior fiscal year primarily due to the decline in our stock price since September 30, 2015. Amortization expense increased $96.0 million from the prior fiscal year primarily due to the amortization of intangible assets originating from the PharMEDium and MWI acquisitions. We incurred significantly more employee severance costs in the current fiscal year due to an initiative to improve operating efficiency, and we also incurred a settlement charge during the current fiscal year in connection with the final settlement of our salaried defined benefit pension plan;
   
Total segment operating income increased by 6.6% compared to the prior fiscal year, primarily due to the additions of MWI and PharMEDium; and
   
Income taxes were a benefit of $37.0 million in the current fiscal year as compared to an expense of $407.1 million in the prior fiscal year. In November 2015, we received a private letter ruling from the Internal Revenue Service ("IRS"), which entitles us to an income tax deduction equal to the fair value of the Warrants on the date of exercise. As a result, we recorded a deferred tax asset and recognized a tax benefit adjustment of approximately $456 million, which represented the estimated benefit from the tax deduction for the increase in the fair value of the Warrants from the issuance date through September 30, 2015. This tax benefit adjustment had a significant impact to our effective tax rate in the fiscal year ended September 30, 2016. In March 2016 and August 2016, the Warrants were exercised by WBA, and an additional tax benefit of approximately $52 million was recognized primarily related to the change in the fair value of the Warrants from September 30, 2015 to their respective exercise dates in fiscal 2016. Our income tax rate was also favorably impacted in fiscal 2016 due to the growth of our international service offerings.

[Source: Form 10-K dated 2016-11-22]

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COMPANY NEWS

▶ Judge urges action on '100 percent manmade' opioid crisis   [Jan-09-18 04:09PM  Associated Press]
▶ AmerisourceBergen Completes Acquisition of H. D. Smith   [Jan-03-18 08:00AM  Business Wire]
▶ Amerisourcebergen Trying To Close In On Key Technical Benchmark   [Dec-20-17 03:00AM  Investor's Business Daily]
▶ Jabil in Green Pre-Market Friday   [12:30PM  GuruFocus.com]
▶ AmerisourceBergen Closes $1.25 Billion Senior Note Offering   [Dec-04-17 04:15PM  Business Wire]
▶ AmerisourceBergen to Acquire H. D. Smith   [04:52PM  Business Wire]
▶ AmerisourceBergen Increases Dividend 4 Percent   [Nov-09-17 09:00AM  Business Wire]
▶ New Mexico sues pharma companies & drug distributors   [Oct-26-17 03:30PM  CNBC Videos]
▶ AmerisourceBergen Declares Quarterly Dividend   [Aug-10-17 09:29AM  Business Wire]
▶ Why AmerisourceBergen Corp. Fell Dramatically Today   [Aug-03-17 06:19PM  Motley Fool]
▶ The Best Stock in Pennsylvania: AmerisourceBergen   [Jul-21-17 12:20PM  Kiplinger]
▶ Ohio sues five drug companies over opioid crisis   [May-31-17 02:20PM  Reuters]
▶ Plunging oil prices and energy companies hit stock indexes   [May-04-17 02:37PM  Associated Press]
▶ Correction Is Over for AmerisourceBergen   [May-01-17 03:29PM  TheStreet.com]
Financial statements of ABC
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