AmerisourceBergen ( ABC) delivered a knockout quarter.

The giant drug distributor blew past Wall Street profit estimates for the latest period Wednesday and raised its guidance for the coming year. The company credited its core drug distribution business for its outperformance.

First-quarter revenue, while up 16% to a record $15.7 billion, did fall shy of the $16.9 billion estimate. However, strong metrics elsewhere more than offset that shortfall.

Net income surged 25% to $209 million, with operating profits of 65 cents a share topping Wall Street estimates by a full 9 cents. The company, in turn, raised its full-year guidance by a nickel to $2.45 to $2.60 a share. Before that update, analyst projections were at the lower end of that range.

"Our outstanding earnings-per-sharer results were driven by strong performance in our traditional distribution business, as well as the continued strength of our specialty distribution business," AmerisourceBergen CEO David Yost said. "The December quarter's excellent performance exceeded our expectations and provides strong momentum for the remainder of fiscal 2007."

AmerisourceBergen's drug distribution business posted above-market growth rates in the latest period, although the company's decision to drop a big low-margin account will affect that growth rate in the coming quarters. Still, the company's specialty drug business remains on quite a roll. There, revenue grew by a whopping 40% in the latest quarter alone. Sales of generic drugs expanded as well.

Margins, helped by falling expenses, also posted significant gains. But at least one Wall Street expert seemed to question whether that trend could continue.

"Operating expenses as a percentage of revenue ... were the lowest they've been," UBS analyst Ricky Goldwasser noted on Wednesday. Thus, "we are looking for more detail on the sustainability" of that metric.

Goldwasser has a reduce recommendation and a $44 price target on AmerisourceBergen's stock in the meantime. His firm makes a market in the company's securities.

Regular investors seem to favor AmerisourceBergen more. In a recent Bank of America survey, AmerisourceBergen trailed only WellPoint ( WLP) in a list of top health care picks for 2007. Interestingly, one of AmerisourceBergen's biggest competitors -- McKesson ( MCK) -- emerged as a leading "sell" candidate in that same survey.

Both stocks jumped on Wednesday. AmerisourceBergen was the bigger winner, soaring 7.5% to set a new 52-week high of $51.68. Meanwhile, McKesson rose 1.2% to $55.09.

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