Please ensure Javascript is enabled for purposes of website accessibility

How Express Scripts Plans to Keep Growing

By Dan Caplinger - Apr 25, 2013 at 3:20PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company announces earnings next Monday.

Next Monday, Express Scripts (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.

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

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Express Scripts Holding Company Stock Quote
Express Scripts Holding Company
ESRX

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
345%
 
S&P 500 Returns
119%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.