AmerisourceBergen Corp ABC

We maintain our $135 fair value estimate on narrow-moat AmerisourceBergen Corp as second-quarter results supported our forecasts. Although revenue fell short of both our expectation and Factset consensus, gross margins exceeded our estimate. The pharmaceutical and distribution services segment underperformed with 3% sales growth year over year, despite solid performance of specialty products such as oncology supply and biosimilars. We interpret this lower growth as a natural correction following last year’s swell in drug volume across the pharmaceutical industry. Other revenue outperformed at 12% growth, which was credited to continued traction of the direct to patient business among manufacturers as well as the recent rise in pet ownership. Gross margins decreased by 4%, which we mainly attribute to generic pricing pressures. Adjusted operating expenses remained stable.