Will This Upgrade Help AmerisourceBergen (ABC) Stock Today?

NEW YORK (TheStreet) -- AmerisourceBergen (ABC) was upgraded to "outperform" from "market perform" at FBR Capital Markets due to the recent pullback in shares.

The stock has pulled back 10%, over the past three months. FBR Capital kept their current price target of $75 per share.

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TheStreet Ratings team rates AMERISOURCEBERGEN CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate AMERISOURCEBERGEN CORP (ABC) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 10.4%. Since the same quarter one year prior, revenues rose by 38.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.81, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.41 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • Compared to its closing price of one year ago, ABC's share price has jumped by 27.29%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • AMERISOURCEBERGEN CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, AMERISOURCEBERGEN CORP reported lower earnings of $2.10 versus $2.84 in the prior year. This year, the market expects an improvement in earnings ($3.69 versus $2.10).
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Health Care Providers & Services industry and the overall market, AMERISOURCEBERGEN CORP's return on equity exceeds that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: ABC Ratings Report

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