We recently upgraded
Express Scripts Holding Company
) to Outperform from Neutral following impressive second quarter of
2012 results, released on August 7. Our long term recommendation is
in line with the Zacks #1 Rank (Strong Buy rating) carried by the
stock in the short run.
Express Scripts beat the Zacks Consensus Estimates for both
revenue as and earnings in the second quarter of 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. Revenues
jumped 143.7% thanks to the expanded product portfolio following
the acquisition of Medco Health in April 2012.
Apart from releasing second quarter results, Express Scripts
raised its adjusted earnings guidance for 2012. The company now
expects $3.60-$3.75 per share (previous guidance: $3.36 - $3.66 per
share). We expect Express Scripts to achieve the new
guidance, thanks the expanded product portfolio.
Consequently, our 2012 earnings estimate of $3.70 per share (up 17
cents) is well within the company's new guidance range.
We are also impressed by thefavorable resolution of Express
Scripts' long-standing dispute with retail giant
) in July 2012. Per the new agreement, Walgreen will start filling
prescriptions from Express Scripts' customers from September 15,
2012. Express Scripts will extend its services to over 64,000
pharmacies across the US following the inclusion of Walgreen in
Express Script's network. The favorable resolution is a major
positive for Express Scripts andhas removed a major overhang on the
Favorable events such as the resolution of the dispute with
Walgreen, strong second quarter results and the upbeat guidance
lead us to believe that Express Scripts is undervalued at current
levels with significant scope for appreciation.
EXPRESS SCRIPTS (ESRX): Free Stock Analysis
WALGREEN CO (WAG): Free Stock Analysis Report
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