Express Scripts Holding Company (ESRX) posted fourth quarter 2013 earnings per share (excluding special items) of $1.12, up from $1.05 reported in the year-ago quarter and in line with the Zacks Consensus Estimate.
Excluding special items but including amortization expense, earnings per share came in at 72 cents compared to 67 cents in the year-ago quarter.
Quarter in Detail
Revenues were down 5.8% year over year in the reported quarter to $25.8 billion but surpassed the Zacks Consensus Estimate of $25.2 billion. The decrease in revenues was attributed to lower claims volume owing to the transition of claims of UnitedHealthcare Group.
The expected roll-off of UnitedHealth Group claims was completed by the end of 2013.
Adjusted gross profit was down 6.5% to $2.2 billion in the reported quarter. Adjusted selling, general and administrative expenses declined 20.9% to $776.9 million.
Total adjusted claims at Express Scripts for the reported quarter came in at $360.7 million, down 12.1% due to an expected roll-off of claims from UnitedHealthcare Group.
Cash generated from operating activities came in at $2.9 billion, up 8% year over year. Express Scripts repurchased 35.5 million shares for $2.5 billion. We believe the buyback program highlights the company’s commitment to create value for shareholders.
2013 Results
Revenues increased 11.1% to $1.0 billion, in line with the Zacks Consensus Estimate. Earnings per share came in at $4.33, beating the Zacks Consensus Estimate of $4.32.
Earnings Outlook
Express Scripts now expects adjusted earnings in the range of $4.88–$5.00 per share in 2014, up 18% to 21% from 2012. The Zacks Consensus Estimate currently stands at $4.93 per share, within the new guidance range.
The fourth quarter results did not surprise us. In Apr 2012, Express Scripts acquired healthcare company, Medco Health Solutions. The company has integrated its systems, processes and solutions to efficiently serve customers. The company will bring all its clients on one technology platform and focus on organic growth going forward.
In the long run, Express Scripts expects to benefit from the growth of home delivery and specialty drugs, healthcare reform, productivity improvements and capital deployment.The company expects a 10% to 20% growth in the bottom line for the next several years.
However, the introduction of insurance exchanges, additional costly regulations, escalation of brand drug prices and increased specialty drug utilization loom large on the company’s business in the long run.
Currently, Express Scripts carries a Zacks Rank #4 (Sell). Other stocks that look attractive include ICON Public Ltd. Co. (ICLR), Cardinal Health (CAH), and Parexel International Corp. (PRXL). While ICON Public holds a Zacks Rank #1(Strong Buy), Cardinal Health and Parexel carry a Zacks Rank #2 (Buy).
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