Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Prescription-drug benefits processor Express Scripts (NASDAQ:ESRX) should have taken a sick day today, as its shares lost as much as 18% before settling into a 12% loss as of this writing.
So what: Although Express Scripts beat earnings estimates by $0.03 per share, its revenue came in under projections by $500 million. This wasn't the cause of the drop, as Express Scripts analysts had some uncertainty as they adjusted to the company's acquisition of rival drug-benefits company Medco Health Solutions. The big news was CEO George Paz claiming that forward expectations for next year might be too optimistic, in light of economic uncertainty heading into 2013.
The pessimistic prediction helped drag down CVS Caremark (NYSE:CVS), one of its most important partners. CVS had a strong report today as well, beating estimates on top and bottom lines and boosting its full-year forecast, but its shares were essentially flat this afternoon.
Now what: Investors never want to hear that their expectations for their stocks are too high, but this sounds like an indicator of broad economic weakness, rather than simply a problem with Express Scripts alone. However, Express Scripts' P/E is still a bit far from bargain territory, and with the company delaying full-year projections for 2013 to next February, it seems that the best thing for potential investors to do is be patient and dig deeper.
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