How Express Scripts Plans to Keep Growing

Next Monday, Express Scripts (NASDAQ: ESRX  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed kneejerk reaction to news that turns out to be exactly the wrong move.

Health-care reform has had a big impact on the handling of prescription drugs, and the largest pharmacy benefit manager in the country, Express Scripts has had to navigate the changes that Obamacare has wrought to seek out new growth opportunities. Let's take an early look at what's been happening with Express Scripts over the past quarter, and what we're likely to see in its quarterly report.

Stats on Express Scripts

Analyst EPS Estimate

$0.98

Change From Year-Ago EPS

34%

Revenue Estimate

$25.54 billion

Change From Year-Ago Revenue

111%

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

Does Express Scripts have the right prescription for great earnings?
Analysts have gotten slightly more optimistic in recent months about the earnings prospects for Express Scripts. They've raised their consensus for the just-ended quarter's earnings by $0.02 per share, while adding $0.06 to their per-share calls for the full 2013 year. Yet, the stock has been largely stuck in neutral, rising less than 3% since mid-January.

The evolution of Obamacare has had a huge impact on the health-care industry, and the outlook for pharmacy benefits managers like Express Scripts is generally good. As the individual coverage mandate draws millions of new customers into the insurance market, Express Scripts will see increasing demand for its services from top client WellPoint and other insurance-company customers.

Indeed, there's a good argument that Express Scripts can't lose, no matter how Obamacare fares. Regardless of whether business comes from new health-insurance exchanges or directly from insurance companies, keeping prescription costs down will be crucial to overall cost management, and Express Scripts should reap its share of the resulting increase in business.

Still, competition has gotten fierce in the industry. Back in February, news that Catamaran saw even a slight possibility of losing its contract with Cigna sent share of Express Scripts rising. Moreover, mail-order pharmacy services have generated huge interest in the industry, given their potential to cut out drugstore-pharmacy middlemen. Express Scripts claims to be the top mail-order prescription company, but rival CVS Caremark is also a market leader in the space, and will continue to fight for business there, as well.

In Express Scripts' report, watch for how much of its sales come from generic drugs, which are more profitable for the company. As more newly off-patent drugs produce new generics, Express Scripts should see its share of generic sales rise, and that should leave shareholders happier as a result.

The need for innovative solutions for skyrocketing health-care costs is as clear as ever. Express Scripts is part of that solution, and in this brand new premium report on the company, we clearly lay out the opportunity in front of this misunderstood stock. Claim your copy by clicking here now.

Click here to add Express Scripts to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


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