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UBS Warburg cut AmerisourceBergen's (ABC
) price target by $2 to $68.
Analyst Howard Capek says he thinks Tenet Healthcare has pulled its $450 million a year pharmaceutical distribution contract from AmericsourceBergen, and will begin using McKesson Corp. in early 2003. Capek cited price and service for Tenet's decision. Given the tight structure of typical hospital contracts (price, payment terms, etc.), Capek says he doesn't think this will have material financial impact on AmericsourceBergen.
However, Capek says collapsing a distribution contract with high-need clients highlights the potential risks of integration. He finds the $68 target appropriate for the sector and company-specific risks involved. Capek is keeping his $3.88 fiscal 2003 (Sept.) earnings per share and $4.49 fiscal 2004 estimates. He also rates the shares as hold.