Image source: Express Scripts.

Express Scripts Holding Company (NASDAQ:ESRX) reported second-quarter results on July 25. Even as it remains locked in a heated lawsuit with its biggest customer, the pharmacy benefits manager once again boosted its full-year earnings outlook.

The raw numbers


Q2 2016

Q2 2015

Growth (YOY)


$25.22 billion

$25.45 billion


Net Income

$720.7 million

$600.1 million


Earnings Per Share




Data source: Express Scripts Q2 2016 earnings press release. YOY = year over year.

What happened with Express Scripts this quarter?

  • Adjusted prescriptions claims fell 2% year over year to 315.3 million.
  • EBITDA (earnings before interest, taxes, depreciation, and amortization) per adjusted claim increased 2% to $5.70.
  • Net income -- adjusted to exclude integration costs and other non-recurring items -- grew 2% to $998.7 million. And adjusted earnings per share, which were boosted by stock buybacks, rose 9% to $1.57.

Anthem update

Regarding its ongoing contract dispute with health issuer Anthem (NYSE:ANTM), Chairman and CEO Tim Wentworth had this to say during a conference call with analysts:

We're working really effectively with Anthem to help them put in programs that help manage costs and drive their business. We're providing really strong service to them. Our teams are working well together. I don't have anything more to report than that, at this point.

Wentworth noted the dispute with Anthem might not be resolved in the near future:

Obviously, we still have a lawsuit between the two companies that they filed and that we've counter filed on, and we are in the very early innings of that game, barring any change of position on their part, of which I am hopeful and which, again, I believe the best way to position ourselves for that is just to continue to really drive great value to them through these programs that we're putting in place, as well as taking great care of their members.

As Express Scripts' largest customer, Anthem, accounts for about 14% of the pharmacy benefits manager's revenue in 2014. In addition, many investors fear the situation with Anthem could impact Express Scripts' contract negotiations with its other customers.

Seemingly to quell these concerns, Express Scripts said it expects its retention rate for the 2016 selling season to be in the range of 96% to 98%, excluding some business that's already slated to roll off 2017. That's up from the company's prior projections of 95% to 98%.

Looking forward

Management expects second-quarter adjusted earnings per share to be between $1.72 and $1.76, which would represent growth of 19% to 21% from the prior-year period.

Express Scripts also narrowed its full-year adjusted EPS forecast to a range of $6.33 to $6.43, up from previous estimates of $6.31 to $6.43 given in April, $6.10 to $6.28 issued in February, and initial guidance of $6.08 to $6.28 provided back in December. This new EPS outlook signifies an increase of 14% to 16% compared to 2015.

"As the healthcare industry changes, a primary need of payers and patients remains the same: access to affordable medicine," said Wentworth in a press release. "An increase in our expected 2017 retention rate to a range of 96% to 98% is a direct result of our unique business model of client alignment, the industry's most focused and innovative solutions, and a compassionate culture of caring employees."

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