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Express Scripts (ESRX) Tops Q2 Earnings, Lags Revenues

Pharmacy benefit manager Express Scripts Holding CompanyESRX posted second-quarter 2016 earnings per share (excluding special items) of $1.57, in line with the Zacks Consensus Estimate but higher than the year-ago quarter figure of $1.44.

Express Scripts Holding Company (ESRX) Street EPS & Surprise Percent - Last 5 Quarters | FindTheCompany

On a reported basis, earnings came in at $1.13 per share, up from the year-ago figure of 88 cents.

Quarterly Highlights

Revenues of $25.2 billion missed the Zacks Consensus Estimate of $25.5 billion and were also down from the year-ago quarter figure of $25.4 billion.

Adjusted gross profit was up 0.9% at $2.2 billion. Adjusted selling, general and administrative expenses was roughly flat at $496.6 million.

Total adjusted claims amounted to 315.3 million, down 1.8% year over year.

In Jul 2016, the company issued senior notes - $1,000.0 million of 3% senior notes due Jul 2023, $1,500.0 million principal amount of 3.4% senior notes due Mar 2027 and $1,500.0 million aggregate principal amount of 4.8% senior notes due Jul 2046. The net proceeds will be used to repay a portion of its 2015 two-year term loan, to complete a tender offer for its 2.650% senior notes due 2017 and to complete a tender offer for a portion of each of the 7.125% senior notes due 2018 issued by Medco Health Solutions, Inc., along with the the 7.250% senior notes due 2019 issued by the company. During the remainder of the third quarter, Express Scripts plans to use the remaining proceeds to redeem further debt and general corporate purposes.

Outlook

Express Scripts narrowed its outlook for 2016. The company now anticipates earnings in the range of $6.33 to $6.43 per share, compared to the previous projection of $6.31-$6.43. The pre-earnings Zacks Consensus Estimate of $6.35 is well within the guided range. The company estimates adjusted claims for 2016 in the range of 1,260 million to 1,290 million compared to the previous range of 1,255-1,295 million. Claims volume will be determined by retention rate, organic growth and new sales.

For the third quarter, Express Scripts expects earnings in the range of $1.72 to $1.76 per share, while adjusted claims are projected to be 311 million to 321 million.

EXPRESS SCRIPTS Price and EPS Surprise

EXPRESS SCRIPTS Price and EPS Surprise | EXPRESS SCRIPTS Quote

Our Take

Express Scripts reported mixed results for the quarter wherein it beat earnings estimates but missed on revenues. We expect management to shed further light on the status of its contract with Anthem, Inc. ANTM during the earnings call. As per Anthem, it is receiving competitive benchmark pricing and is entitled to more favorable terms. Express Scripts believes that the contract might not be renewed at all or renewed at less favorable terms, given the recent litigation.

Express Scripts carries a Zacks Rank #3 (Hold). Investors interested in the health care sector may consider Gilead Sciences GILD and Johnson & Johnson JNJ . Both the stocks carry a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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