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Express Scripts (ESRX) Up 2.9% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Express Scripts Holding Company (ESRX - Free Report) . Shares have added about 2.9% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is ESRX due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Recent Earnings

Express Scripts posted first-quarter 2018 adjusted earnings of $1.77 per share, which beat the Zacks Consensus Estimate by a penny. Further, adjusted earnings improved 33% year over year.

Revenues of $24.78 billion edged past the Zacks Consensus Estimate of $24.76 billion and inched up 0.5% year over year. The upside was driven by operational cost improvement backed by focus on technology, digital tools, home delivery and specialty services.

Q1 Patient Claim Volume Details

Express Scripts’ first-quarter 2017 witnessed year-over-year declines in patient claims.

Adjusted network claims were 262.8 million, down 1.6% year over year.

Adjusted home delivery and specialty claims were 77.3 million in the reported quarter, down 8.6% year over year.

As a result, net adjusted claims in the first quarter were 340.1 million, down 3.3% on a year-over-year basis. The decline was primarily driven by the loss of certain public-sector clients.

Margin Details

Adjusted gross profit in the first quarter was $2.94 billion, up 0.6% year over year. As a percentage of revenues, adjusted gross margin was flat year over year.

Adjusted selling, general and administrative expenses were $917.8 million, up 12.2% from the prior-year quarter.

Guidance

Adjusted earnings per share for the second quarter of 2018 are estimated in the range of $2.18-$2.22, which represents growth of 26-28% year over year. Notably, the Zacks Consensus Estimate for earnings is currently pegged at $2.29, which is above the projected range.

The company expects total adjusted claims for the second quarter in the range of 335-345 million, of which 280-290 million are attributable to the core business.

For 2018, adjusted earnings are estimated in the band of $9 to $9.14, significantly below the previous range of $9.27-$9.47 per share. This is because of suspension of share-repurchase program. Notably, the Zacks Consensus Estimate for earnings is currently peged at $9.32, which lies significantly above the guidance.

Revenues are expected in the band of $99 billion to $102 billion. The Zack Consensus Estimate for revenues in 2018 is currently pegged at $100.86 billion, which lies within the guidance.    

Adjusted EBITDA is expected between $7.6 billion and $7.8 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to eight lower.

VGM Scores

At this time, ESRX has a strong Growth Score of A, though it is lagging a bit on the momentum front with a B. The stock was also allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is equally suitable for value and growth investors while momentum investors may want to look elsewhere.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise ESRX has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.




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