UPDATE: Goldman Sachs Upgrades AmerisourceBergen to Buy on Walgreens/Alliance Boots Deal

In a report published Wednesday, Goldman Sachs analyst Robert P. Jones upgraded the rating on AmerisourceBergen Corp.

from Neural to Buy, and raised the price target from $52.00 to $61.00. In the report, Jones noted, “While shares have clearly reacted positively to the announcement that ABC won the prime vendor contract with Walgreens (up 10%; $1bn in market cap), we see meaningful upside from the joint venture formed as a part of this unprecedented arrangement. For perspective, we estimate that over time the savings ABC can extract from being part of the largest global purchaser of generic drugs could eclipse the amount of accretion resulting from the distribution contract alone. Furthermore, we see additional upside optionality from (1) the generic sourcing initiative and (2) potential to bring its leading Specialty distribution business to the global stage. On top of the accretion already in our numbers from the $28bn prime vendor award, we now add $0.20 to FY15 from JV-related COGS reduction and introduce FY16 of $5.22, which includes $0.43 from the distribution contract and $0.50 from further COGS savings. Our FY13-FY16 EPS CAGR is now 20% and we raise our 12-month price target to $61 from $52.” AmerisourceBergen Corp. closed on Tuesday at $52.92.