By Paul Price
ESRX is a full position (double-buy) in Market Shadow's Value Portfolio. It is trading at $59.60 in the premarket, Apr. 30, 2013.
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Express Scripts said its first-quarter earnings jumped 39 percent as the company continued to book millions of new prescriptions following its acquisition of Medco last April (2012). In addition, company executives raised the its full-year earnings outlook by 3 cents to a range of $4.23 to $4.33 per share. The number of prescriptions ESRX handled more than doubled to almost 390 million. (Source)
Research firm Morningstar commented on ESRX this morning. Its full opinion is only available to subscribers, but here is an excerpt. Morningstar sees $73 as the stock's fair value.
Express Scripts ESRX reported results that were mainly in line with our current expectations, and we are maintaining our $73 fair value estimate and wide moat rating. Year over year, total revenue increased 148% (including revenue from the Medco acquisition); however, operating margins decreased 144 basis points to 3.23% as the firm continues to integrate Medco. Excluding depreciation and amortization and other nonrecurring charges, adjusted EBITDA per adjusted claim increased 20.0% to $4.08. We believe this solid increase in profitability is a positive and points to a healthy price environment and continued successful integration of the recent major acquisition. Additionally, the firm was able to increase the use of generic drugs among its network and home delivery segments. Even with the positive profit dynamic, we believe some uncertainty remains regarding Express Scripts' future operating environment. The Centers for Medicare & Medicaid Services recently released its 2014 Medicare Part D payment benchmarks, which include lower deductibles, out-of-pocket thresholds, and cost-sharing provisions for Medicare recipients. These potential provisions would most likely have a negative impact on some the firm's customers, and these pressures could filter down to Express Scripts itself. Offsetting this headwind is our expectation for accelerating improvement in the U.S. employment market. For the entire note, click here.