Express Scripts Inc.’s (ESRX) first quarter 2012 adjusted earnings of 73 cents per share (excluding special items) missed the Zacks Consensus Estimate by 4 cents. Earnings were however 10.6% above the year-ago figure. The jump in year-over-year earnings is attributable to higher revenues and a lower share count.
First quarter revenues of $12.1 billion surpassed the Zacks Consensus Estimate of $11.5 billion and the year-ago revenues of $11.1 billion.
Quarterly Details
Adjusted gross profit for the quarter improved 11.2% to $860.5 million, and adjusted selling, general and administrative expenses went up 26.1% to $230.6 million.
Total claims at Express Scripts for the reported quarter came in at 167.0 million as against 162.0 million in the first quarter of 2011. Claims comprise network claims, home delivery claims, and specialty and other claims.
Specialty and other claims include drugs distributed through patient assistance schemes and limited distribution contracts with pharmaceutical manufacturers in addition to Emerging Market claims. Total adjusted claims (thrice the home delivery claims since such claims are typically 90-day claims) of 192.8 million were more than the year-ago adjusted claims of 186.1.
Outlook for 2012
Express Scripts expects to end 2012 with adjusted earnings in the range of $3.36 – $3.66 per share. The current Zacks Consensus Estimate of $3.64 per share lies at the higher end of the guidance range.
Additionally, the company expects total adjusted claims to be about 1.4 billion.
Express Scripts expects the acquisition of Medco Health (on April 2, 2012) to be slightly accretive to earnings during the integration period and moderately accretive once the integration is complete. The company expects Medco to be fully integrated in the first half of 2014. Moreover, Express Scripts expects to generate $1 billion in synergy, following the integration of the two companies.
Our Recommendation
Currently, we have a Neutral recommendation on Express Scripts. The stock carries a Zacks #3 Rank (Hold rating) in the short-run.
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