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Express Scripts Provides Better-than-Expected 2016 Outlook

Express Scripts Holding CompanyESRX has issued an encouraging guidance for 2016.

The company expects adjusted earnings per share for 2016 in the range of $6.08 to $6.28 while the Zacks Consensus Estimate was $6.05 (pre-guidance). Adjusted claims are forecasted between 1,255 and 1,295.

The company's guidance includes the impact of the changes in services provided to Coventry and Catamaran. Express Scripts stated that the Coventry medicare business will roll off by the year end, while Coventry commercial and medicaid book of business are expected to roll off in 2017. On the other hand, Catamaran has been acquired by UnitedHealth Group UNH .

Express Scripts stated that its 10-year agreement with one of its largest client, Anthem ANTM , is still under review. The companies had signed the agreement in 2009. The deal allows a periodic pricing review from time to time during the tenure.

The company also reaffirmed its 2015 guidance. Express Scripts continues to expect earnings per share in the range of $5.51-$5.55, up 13-14% year over year. The Zacks Consensus Estimate of $5.53 is well within the company's estimated range. The company expects total adjusted claims in the range of 1,290 million to 1,310 million.

We note that Express Scripts stands to benefit from increased generic utilization, shift toward mail orders, strong specialty growth and an aging population.

Branded drugs are becoming increasingly expensive due to double-digit brand inflation, continued rise in the price of specialty drugs and overwhelming regulatory burden pushing demand for generics. Hence, clients need innovative solutions to counter this trend.

Moreover, consumers are taking a proactive approach in managing their healthcare decisions. All these trends bode well for the company as they allow it to create solutions such as home delivery programs, narrow networks, restricted formularies and specialized care.

Recently, Express Scripts announced that it has entered into a partnership with Imprimis Pharmaceuticals IMMY to provide a low-cost formulation of Daraprim.

Express Scripts currently carries a Zacks Rank #2 (Buy).

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EXPRESS SCRIPTS (ESRX): Free Stock Analysis Report

UNITEDHEALTH GP (UNH): Free Stock Analysis Report

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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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