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CFO's Exit Prompts Bearish Backlash Toward AmerisourceBergen

Baird doled out a lukewarm 'neutral' rating for ABC

by 2/13/2012 1:45:31 PM
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Before the opening bell this morning, AmerisourceBergen Corporation (ABC - 37.00) reiterated its guidance for fiscal 2012. ABC is expecting a per-share profit of $2.74 to $2.84, and flat-to-modest revenue growth. Analysts, meanwhile, are looking for $2.81 per share in profit.

Separately, ABC announced the resignation (effective immediately) of longtime Chief Financial Officer (CFO) Michael DiCandilo, and appointed Corporate Controller Tim Guttman to the post until a replacement is found.

Following word about DiCandilo's departure, R.W. Baird lowered its rating for the equity to "neutral" from "outperform." "We weren't expecting this transition, and it comes on the heels of ABC's first quarterly EPS miss in over four years," Baird said in a note to clients. The firm also stressed its concern about what the future would hold, should Medco Health Solutions (MHS) -- ABC's biggest client -- be acquired by Express Scripts (ESRX).

There could be additional downgrades in store for ABC, as the brokerage bunch is overwhelmingly bullish toward the stock. Zacks reports 11 "strong buy" endorsements, compared to just two tepid "holds." What's more, the average 12-month price target -- as calculated by Thomson Reuters -- rests at $45.33, which represents a 22.8% premium to today's session low of $36.91.

Elsewhere on the Street, it seems that relatively few traders are betting on ABC to decline. Even though short interest increased by 19% over the past month, these bearish bets account for just 2.4% of the equity's float, which signifies a rather meager supply of sideline cash.

Technically speaking, ABC has taken a more than 3.7% hit so far today, taking a significant chunk out of its 3.8% year-to-date gain. This slide has pushed the stock below its 100-day moving average and the $38 mark -- both of which acted as resistance from mid-November 2011 through the beginning of January 2012, and could resume their roles in the near term. At last look, the shares are trying to find their footing in the $37 area.


Should ABC continue to struggle beneath these emerging technical hurdles, an unwinding of optimism on Wall Street could only make matters worse for the drug retailer.


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