Image source: Express Scripts.

Express Scripts Holding Company (ESRX) reported fourth-quarter results on Feb. 16. The pharmacy benefits manager boosted its full-year earnings outlook even as it remains in a heated contract dispute with its largest customer.

Express Scripts results: The raw numbers


Q4 2015

Q4 2014

Growth (YOY)


$26.1754 billion

$26.3126 billion


Net Income

$773.5 million

$581.8 million


Earnings Per Share




Data source: Express Scripts Q4 2015 earnings press release.

What happened with Express Scripts this quarter?

  • Express Scripts managed 341.5 million prescription adjusted claims during the fourth quarter, an increase of 1% from the fourth quarter of 2014.
  • Those claims were also more profitable, with adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) per claim rising 3% year over year to $5.66
  • Net income -- adjusted to exclude integration costs and other non-recurring items -- rose 4% to $1.1 billion. And adjusted earnings per share, boosted by stock buybacks, increased 12% to $1.56.

What management had to say
"Our job is to continue to take advantage of the opportunities and uniquely help clients withstand the constant challenges in the healthcare marketplace by taking bold actions to effectively balance pharmacy cost and care, said Chairman and CEO George Paz. "Our focused alignment continues to control client costs, improve patient care, and drive long term value to our shareholders."

Anthem dispute
In an update regarding ongoing contract talks with health insurer Anthem (ELV -0.07%), Paz said that Express Scripts remains "fully committed to good faith negotiations."

Yet Paz balked at the $3 billion in additional savings that Anthem has demanded. "I have no clue where the $3 billion came from. I have no concept, the number doesn't make any sense." 

Paz and his team declined to provide more details regarding these negotiations, even as analysts peppered Express Scripts' management with questions during its conference call.

"I really just do not want to get into the details here," said Paz. "I know that's not very satisfying, but it really is the right thing to do. I could not imagine, if I was having a challenge with one of my vendors, that they would appreciate it if I was trying to air all their dirty laundry out, and try to force a negotiation through a conference call with shareholders. That just doesn't seem appropriate to me so that's just not the way we are going to do it."

As Express Scripts' largest customer, Anthem accounts for about 14% of revenue. In addition, the outcome of these talks is likely to impact Express Scripts' contract negotiations with its other customers. So expect investors to continue to press for more information in the months ahead.

Looking forward
Management expects first-quarter adjusted earnings per share in the range of $1.18 to $1.22, which would represent an increase of 7% to 11% from the prior year quarter.

Express Scripts also raised its adjusted EPS guidance for 2016 to between $6.10 and $6.28, up from a range of $6.08 to $6.28. The new EPS range would represent growth of 10% to 14% over 2015.

"Building upon our strongest retention year ever, an outstanding 1/1/16 performance and the industry's deepest set of cost-saving solutions, Express Scripts has momentum that maintains our confidence in our 2016 guidance and justifies our excitement about our future," said President Tim Wentworth. "Financially and operationally, we are well positioned to drive growth and deliver value to clients and shareholders."