Express Scripts Holding Company'
s (
ESRX
) second-quarter 2012 adjusted earnings of 88 cents per share beat
the Zacks Consensus Estimate of 82 cents and increased 23.9% from
the year-ago period. Higher revenues boosted earnings in the
second-quarter of 2012.
On a reported basis (including special items), earnings declined
68.2% to 21 cents in the second quarter of 2012. The decline was
primarily due to the expenses associated with Express Script's
purchase of Medco Health Solutions in April 2012.
Revenues jumped 143.7% in the reported quarter to $27.69
billion, beating the Zacks Consensus Estimate of $26.4 billion. The
massive jump in revenues was attributable to the expanded product
portfolio at Express Scripts due to the acquisition of Medco Health
Solutions.
Adjusted gross profit jumped 165% to $2.2 billion in the
reported quarter, boosted by the inclusion of results of the
erstwhile Medco Health Solutions. Adjusted selling, general and
administrative expenses climbed 282.7% to $744.8 million.
Total adjusted claims at Express Scripts for the reported
quarter came in at 404.3 million as opposed to 185.7 million in the
second quarter of 2011.
2012 Earnings Outlook Upped
Apart from releasing second-quarter results, Express Scripts
upped its adjusted earnings guidance for 2012. The company now
expects adjusted earnings for 2012 in the range of $3.60-$3.75 per
share (previous guidance: $3.36 - $3.66 per share). The Zacks
Consensus Estimate currently stands at $3.67 per share.
Impressive operating performance, increased generic utilization
and the accelerated realization of savings led Express Scripts to
increase its projected earnings range for 2012. Express Scripts
expects to generate savings of $1 billion on complete integration
of Medco Health's operations into Express Scripts' business. Total
adjusted claims for 2012 are expected to be $1.4 billion.
Our Take
We are impressed by the favorable resolution of Express Scripts'
long-standing dispute with retail giant
Walgreen
(
WAG
). In July 2012, the companies inked a multi-year pharmacy network
agreement. Express Scripts will extend its services to over 64,000
pharmacies across the US following the inclusion of Walgreen in
Express Script's network. Per the new agreement, Walgreen will
start filling prescriptions from Express Scripts' customers from
September 15, 2012. The favorable resolution has removed a major
overhang on Express Scripts' shares.
Express Scripts was also in the news recently when it inked a
three-year supply deal with
AmerisourceBergen Corporation
(
ABC
). The deal will take effect from October 1, 2012. Per the terms of
the deal, AmerisourceBergen will supply Express Scripts with
pharmaceuticals worth $18.5 billion annually. The decision follows
Express Scripts' purchase of Medco Health Solutions.
We note that Express Scripts has decided not to renew its
pharmaceutical distribution agreement with
Cardinal Health
(
CAH
) following its expiry on September 30, 2012.
We currently have a Neutral recommendation on Express Scripts.
The stock carries a Zacks #3 Rank (Hold) in the short run.
AMERISOURCEBRGN (ABC): Free Stock Analysis
Report
CARDINAL HEALTH (CAH): Free Stock Analysis
Report
EXPRESS SCRIPTS (ESRX): Free Stock Analysis
Report
WALGREEN CO (WAG): Free Stock Analysis Report
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