Back to top

Express Scripts (ESRX) Q3 Earnings In Line, FY17 View Up

Read MoreHide Full Article

Express Scripts Holding Company posted third-quarter 2017 adjusted earnings per share of $1.90, which were in line with the Zacks Consensus Estimate. Further, adjusted earnings jumped from $1.74 per share in the year-ago quarter.

Revenues of $24.68 billion missed the Zacks Consensus Estimate of $25.61 billion and were also lower than $25.41 billion in the year-ago period.

Q3 Highlights

Adjusted gross profit in the third quarter was flat year over year at $2.24 billion. Adjusted selling, general and administrative expenses were $759.3 million, down 13.5% from the prior-year quarter. Total adjusted claims amounted to 343.6 million in the third quarter, flat year over year.

The St. Louis, MO-based pharmacy benefit manager's EBITDA (earnings before interest, tax, depreciation and amortization) witnessed a 1% rise to $1,947.4 million in the third quarter. The upside was driven by operational cost improvement backed by focus on technology, digital tools, home delivery and specialty services.

Balance Sheet

The company exited the quarter with cash and cash equivalents of $3.40 billion compared with $3.08 billion at the end of 2016. Total debt, at the end of the quarter, was $13.73 billion versus $14.85 billion at the end of 2016. In fact, the company is striving to reduce its debt levels.

Guidance Raised

Express Scripts increased guidance for full-year 2017 adjusted earnings per share to a range of $6.97 to $7.05, from a range of $6.95 to $7.05. This represents an increase of 10% over adjusted earnings per share results at the mid-point of the range in 2016.

For the fourth quarter, adjusted earnings per share are estimated in the range of $2.03 to $2.11, which represents growth of 8% to 12% over the fourth quarter of 2016. The company expects total adjusted claims for the fourth quarter in the range of 347 million to 363 million.

Express Scripts Likely to Lose Anthem

Express Scripts recently announced that its biggest customer, the leading health insurer Anthem Inc (ANTM - Free Report) , is not likely to extend its pharmacy-benefits management agreement, slated for expiration by the end of 2019. In 2016, Anthem sued Express Scripts for overcharging its drugs and operational failures. Per management, Anthem refused to participate in further discussions on pricing concessions and probable adjustments for the agreement.

Our Take

We are highly upbeat about the company’s core pharmacy-benefits management long-term outlook. This includes the ongoing volatile healthcare market trends, inflation, patent expiration, lower industry utilization growth and other headwinds.
Further, we expect Express Scripts to continue to benefit from increased generic utilization, shift toward mail orders, strong specialty growth and an aging population. Branded drugs are becoming increasingly expensive due to double-digit brand inflation, continued rise in the price of specialty drugs and an overwhelming regulatory burden which is paving the way for manifold prospects for generics.

Key Picks

Notably, Express Scripts currently has a Zacks Rank #4 (Sell).

Better-ranked stocks in the broader medical sector include EnteroMedics Inc and Luminex Corporation (LMNX - Free Report) . All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

EnteroMedics has an average earnings beat of 55.8% over the trailing four quarters. The company has a solid return of 7.1% over the past month.

Luminex came up with a positive earnings surprise of 188.9% last quarter. The stock has a long-term expected earnings growth rate of 16.3%.

Zacks' Hidden Trades

While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?

Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors.

Click here for Zacks' secret trade>>




In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Luminex Corporation (LMNX) - free report >>

Anthem, Inc. (ANTM) - free report >>

More from Zacks Analyst Blog

You May Like