www.jpmorganmarkets.com
North America Equity Research
25 January 2019
Equity Ratings and Price Targets
Mkt Cap
Rating
Price Target
Company
Ticker
($ mn)
Price ($)
Cur
Prev
Cur
End
Date
Prev
End
Date
AmerisourceBergen
ABC US
17,260.17
79.36
N
n/c
88.00
Dec
-
19
n/c
n/c
McKesson Corporation
MCK US
25,047.43
126.12
OW
n/c
160.00
Dec
-
19
n/c
n/c
Premier, Inc.
PINC US
5,590.96
39.75
N
n/c
45.00
Dec
-
19
n/c
n/c
Cerner
CERN US
18,321.22
54.08
N
n/c
60.00
Dec
-
19
n/c
n/c
LabCorp
LH US
14,103.20
136.00
OW
n/c
185.00
Dec
-
19
n/c
n/c
Cardinal Health
CAH US
14,954.22
48.87
N
n/c
59.00
Dec
-
19
n/c
n/c
Source: Company data, Bloomberg, J.P. Morgan estimates. n/c = no change. All prices as of 23 Jan 19.
Healthcare Technology &
Distribution
Earnings Preview for Weeks of 1/28 and 2/4
Health Care Services –
Distribution, Technology & PBMs
Lisa C. Gill
AC
(1-212) 622-6466
lisa.c.gill@jpmorgan.com
Bloomberg JPMA GILL <GO>
Michael Minchak, CFA
(1-212) 622-6506
michael.minchak@jpmorgan.com
Anne E. Samuel
(1-212) 622-4163
anne.e.samuel@jpmorgan.com
J.P. Morgan Securities LLC
See page 25 for analyst certification and important disclosures.
J.P. Morgan does and seeks to do business with companies covered in its
research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this rep
ort as only a single
factor in making their investment decision.
Calendar 4Q18 earnings season kicks off next week for our Healthcare Technology &
Distribution universe, with reports from AmerisourceBergen before open on Thursday,
1/31, McKesson Corporation after the close on Thursday 1/31, Premier Inc. before
open on Tuesday, 2/5, Cerner after close on Tuesday, 2/5, and LabCorp and Cardinal
Health before open on Thursday, 2/7. Below, we provide a brief overview of our
expectations, and include additional commentary and detailed projections in the note.
AmerisourceBergen (ABC/N, Thurs, 1/31, AM). We project F1Q19 adjusted EPS
of $1.51, which is below the Bloomberg consensus of $1.52 and represents a 2.6%
y/y decrease. While the company does not provide explicit quarterly guidance,
management noted that it expected F1Q19 adjusted EPS to be down slightly y/y.
We believe it is likely that the company lowers the midpoint of the FY19 adjusted
EPS guidance range, as recent news of layoffs at PharMEDium’s Memphis facility
appears to point to the likelihood of a sizeable headwind. We expect the focus of the
call to be on branded inflation and generic deflation trends, the potential for a shift
to a net pricing model, evolution of the wholesaler compensation model and the
regulatory backdrop. From a company-specific standpoint, we expect a focus on
PharMEDium, performance in specialty, the H.D. Smith integration, opex trends,
and plans for capital deployment. Conference call on Thursday, 8:30am ET; dial-
in (612) 234-9960, no passcode.
McKesson (MCK/OW, Thurs, 1/31, PM). We believe MCK is likely to deliver
F3Q19 adjusted EPS in line with or above expectations. Our estimate of $3.14
compares to Bloomberg consensus of $3.16 and represents an 8.0% y/y decline, with
the y/y decline driven by a ~6.1% decline in operating profit, with the benefit from
share repo more than offset by a higher tax rate vs. the prior year period. With just
over two months left in the fiscal year, we expect the company to narrow the
existing guidance range, and believe the midpoint of the adjusted EPS range could
increase slightly (no opioid stewardship expenses). We expect the focus of the call to
be on the outlook for branded price inflation and generic deflation, thoughts on the
wholesaler compensation model and any update on opioid-related costs, thoughts on
near-term contract renewals, and plans for additional capital deployment in the near
term. Conference call on Thursday, 5:00pm ET; dial-in (323) 794-2588,
passcode: McKesson.
Premier, Inc. (PINC/N, Tues, 2/5, AM). We are adjusting our model to reflect the
change to ASC 606 accounting, and note that for YoY percentages, the prior year
has not been restated and is therefore not comparable. We now model F2Q19
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