With Express Scripts (ESRX +0.00%) stock up nearly 40% in the past 12 months, investors had high expectations going into the report -- and the company delivered. The prescription-drug benefit manager posted better-than-expected profits on Tuesday and raised its outlook for the rest of the year. Shares are trading up about a half a percent and less than $2 off of the stock's all-time high at the time of this writing.
The results
Express Scripts reported second-quarter revenue and non-GAAP EPS of $25.5 billion and $1.44, respectively. These results compare to a consensus analyst estimate for revenue of $26.15 billion and adjusted EPS of $1.40. Express Scripts adjusted EPS of $1.44 was above management's own guidance for the quarter for EPS in the range of $1.39 to $1.43.
Compared to last year, Express Scripts' revenue and EPS are up 1.4% and 17%, respectively, from the year-ago quarter.
"We are pleased with our second quarter results and outperforming our guidance," said Express Scripts CEO George Paz in the company's second-quarter earnings release. "Our results are a testament to our model of driving performance through our focused scale and alignment."
Looking back to 2014 as a benchmark, it's worth noting that Express Scripts' second-quarter EPS growth of 17% is in line with its year-over-year growth in EPS last year. The company has been able to consistently drive earnings growth for shareholders.
Looking forward
Looking ahead, management believes it can continue to drive meaningful growth in profitability. In its second-quarter earnings release, Express Scripts management was bullish about the rest of the year, offering an optimistic outlook for the remainder of 2015 as well as robust guidance for Q3.
For the full year, Express Scripts increased its adjusted EPS forecast from a range of $5.37 to $5.47 to a range of $5.46 to $5.54, representing 12% to 14% year-over-year growth compared to EPS in 2014. For Q3, Express Scripts guided for a range of $1.41 to $1.45 in adjusted EPS, or up 9% to 12% from the year-ago quarter.
The company cites its "model of alignment and focused scale" for the more optimistic outlook." As the largest manager of U.S. prescription-drug benefits, Express Scripts believes its scale is playing a key role in its ability grow earnings. And just as important as the company's scale is Express Scripts' focus on ensuring its business model is fully aligned with client needs, management says.
"By aligning our interests with those of our patients and clients our scale is focused on driving down costs while improving health outcomes," Paz explained.
Overall, investors should be pleased with Express Scripts' second-quarter results. The company's unparalleled pricing power with its suppliers and its scale advantages continue to pay off. And management's track record and consistent execution at delivering year-over-year growth in profits suggest there will be more of the same, going forward.
