Express Scripts Guides High As Amazon Lurks, CVS-Aetna Deal Weighs

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Express Scripts ( ESRX ) on Thursday offered profit guidance that outstripped Wall Street estimates, as Amazon ( AMZN ) and CVS Health ( CVS )- Aetna ( AET ) threaten to shake up the drug sector.

[ibd-display-video id=3023066 width=50 float=left autostart=true] The pharmacy benefits manager expects adjusted earnings of $7.67-$7.87 per share for 2018, above consensus estimate of $7.66 among analysts surveyed by Zacks Investment Research.

That would represent 9% to 12% growth from the midpoint of Express Scripts' new guidance for 2017 of $7.00-$7.08, which was revised up from its previous estimated range of $6.97-$7.05 and above the Zacks consensus of $7.01.

Next year's earnings growth should benefit from the pending eviCore acquisition. The eviCore purchase will generate EBITDA of $265 million to $285 million in 2018, Express Scripts said. That purchase, as well as a pending sale of United BioSource, are expected to be complete by December, the company added.

Shares of Express Scripts rose 0.7% to 69.02 on the stock market today after hitting 71.25 intraday. their highest level since March. Among other drug-related stocks, Walgreens Boots Alliance ( WBA ) fell 1.9%, CVS Health gave up 1.1% and Aetna dipped 0.35%, while Amazon rose 0.9%.

IBD'S TAKE : The medtech space has been less affected in 2017 by drug-pricing worries than the pharma and biotech spaces. Can the space climb higher still this year? This Industry Snapshot takes a closer look at the group and strong stocks within it.

Pharma stocks got whacked in October on reports that Amazon could wade into online prescription drug sales. In another blow to Express Scripts that month, health insurer Anthem (ATHM) said it will tie up with CVS on pharmacy benefit management in 2020, after its current contract with Express Scripts ends.

Express Scripts stock has since recovered amid speculation that Amazon may be hunting for a pharmacy benefits manager to gain a foothold in the $300 billion business.

On Nov. 30, Express Scripts CEO Tim Wentworth said he would be open to a deal at the right price, though he wasn't actively looking for one, telling Bloomberg that, "We don't need to sell to be very successful in the future, but we are always open to others who may all of sudden conclude they want what we have."

He added that a partnership with Amazon on a drug distribution arrangement is also possible.

But CVS, which is a major pharmacy benefits manager in its own right, said earlier this month that it will buy health insurer Aetna for $69 billion, with the deal coming as it braces for Amazon to enter the retail prescription business.

Some analysts also say the deal would give the combined company an edge over rivals, with stronger negotiating leverage vs. drug manufacturers.


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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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