AmerisourceBergen Corp. (ABC) increased its earnings expectations for the first quarter of fiscal 2010 and stated that it expects earnings to exceed consensus estimates of 43 cents, mainly due to higher sales of generic drugs. Revenues are expected to grow more than 10% during the quarter. The stock reacted positively to the news, with the share price increasing more than 3%.

For fiscal 2010, AmerisourceBergen stated that it expects earnings at the higher end of its previously issued guidance of $1.82 – $1.92 per share, which represents an increase of 8%-14% over the $1.69 reported by the company in fiscal 2009. The company expects revenue growth in the range of 5% – 7%.

Operating margin growth of flat to low single-digit basis points is expected. The company has guided towards free cash flow in the range of $500 million to $575 million Incorporatedluding capital expenditures of about $140 million.

AmerisourceBergen also intends to repurchase about $350 million of its common shares in fiscal 2010.??AmerisourceBergen exited fiscal 2009 on a strong note, with annual earnings beating the Zacks Consensus Estimates by 3 cents. Performance was driven by strong revenues, lower operating expenses and share repurchases. Revenues increased 2% to $71.8 billion.

We believe AmerisourceBergen is well positioned for growth given the strong performance of its generics and specialty pharmaceuticals business. The company should continue to benefit from growth in the pharmaceutical industry, which is driven by factors like an aging population Incorporatedreased use of generics and introduction of new treatments. We have a Neutral rating on the stock.

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