AmerisourceBergen Corp. (ABC) — This large-cap distributor of pharmaceutical products and health care services recently announced its plans to acquire MWI Veterinary Supply, Inc. (MWIV) for $2.5 billion. This acquisition, which is pending shareholder and regulatory approval, would launch the company into the animal health market.
Analysts at S&P Capital IQ said they see long-term benefits for AmerisourceBergen from the deal thanks to improved sales leverage and product sourcing benefits. In addition, the company should benefit from a 10-year supply contract with Walgreens Boots Alliance Inc (
WAG) that became effective in September 2013.
Capital IQ estimates adjusted earnings per share (EPS) for fiscal 2015 (ending in September) will increase 13% to $4.50. It rates ABC stock a “strong buy” with a 12-month target of $105.
On Oct. 29, ABC stock broke higher from a long-standing bull channel with a breakaway gap, a bullish technical event. Unlike continuation gaps, breakaways are not often closed by profit-taking.
Following the successful break, ABC stock formed a new bull channel with support at its 50-day moving average at $90.56 and resistance at $95.
Buyers may want to play it safe and wait for the company’s fiscal first-quarter earnings report, which is scheduled to be released on Jan. 28. The consensus expectation is for EPS to rise more than 21% to $0.97. A failure to meet analysts’ estimates could result in a pullback and an excellent buying opportunity. However, if estimates are met or exceeded, look for a quick run to my trading target of $105, which is 14% above current prices.
The company pays an annual dividend of $1.16 per share for a forward annual yield of 1.3%.
