Earnings Preview: Express Scripts

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Associated Press

Posted on July 26, 2013 at 1:02 PM

Updated Friday, Jul 26 at 2:01 PM

Express Scripts Holding Co. will give analysts a fresh perspective on how generic drugs and a giant acquisition are affecting the pharmacy benefits manager's performance when it reports its second-quarter financial results Monday.

WHAT TO WATCH FOR: The St. Louis company will release results after markets close and then host a Tuesday morning conference call to discuss the performance and its longer-term growth potential.

Express Scripts completed a $29.1 billion acquisition of competitor Medco Health Solutions in April 2012. That deal made it the nation's largest pharmacy benefits manager, or PBM, by far. The deal swelled Express Scripts revenue. Separately, generic drugs have helped its bottom line for the past few quarters.

Top-selling medicines like the cholesterol fighter Lipitor have lost U.S. patent protection, which exposes them to cheaper generic competition. Generic drugs hurt pharmacy revenue because they cost less than brand-name products. But they help profitability because they provide a wider margin between the cost for the pharmacy to purchase the drugs and the reimbursement received.

Express Scripts started 2013 strong. The company said in April that its first-quarter earnings climbed 39 percent compared with last year, when charges tied to the Medco deal weighed on its performance.

The company's stock closed at $66.73 on Thursday and has climbed 24 percent so far this year.

WHY IT MATTERS: PBMs like Express Scripts handle prescriptions for millions of people. They run prescription drug plans for employers, insurers and other customers. They process mail-order prescriptions and handle bills for prescriptions filled at retail pharmacies. They use large purchasing power to negotiate lower drug prices and make money by reducing costs for health plan sponsors and members.

WHAT'S EXPECTED: Analysts expect, on average, earnings of $1.10 per share on $25.5 billion in revenue, according to FactSet.

LAST YEAR'S QUARTER: Express Scripts earnings fell 49 percent in the company's first quarter after wrapping up its Medco acquisition, but the performance topped analyst expectations when costs from the deal were excluded.

Overall, the company earned $170.9 million, or 21 cents per share, in the quarter. Its revenue more than doubled to $27.69 billion.

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