Express Scripts (ESRX) Q3 Earnings: What's In The Cards?

Pharmacy benefit manager (PBM) Express Scripts Holding Company (NASDAQ:ESRX) is scheduled to report second-quarter 2016 results on Oct 25 after the market closes. Last quarter, the company has posted earnings in line with estimates.

In the four trailing quarters, Express Scripts has delivered positive earnings surprises twice, bringing the average positive earnings surprise to 0.13%.

Let’s see how things are shaping up for this quarter.

Factors at Play

For the third quarter, Express Scripts expects earnings per share in the range of $1.72–$1.76, while adjusted claims are anticipated to be 311–321 million. Demand for the company’s services continues to be solid which should drive its sales. At the second-quarter conference call, management revealed expectations stronger EBITDA growth in the third and fourth quarter. The company anticipates operational cost improvements with focus on technology, digital tools, home delivery and specialty.

We expect Express Scripts to continue benefitting from increased generic utilization, shift toward mail orders, strong specialty growth and an aging population. Branded drugs are becoming increasingly expensive due to double-digit brand inflation, continued rise in the price of specialty drugs and overwhelming regulatory burden pushing demand for generics. Hence, clients need innovative solutions to counter this trend.

Earnings Whispers

Our proven model does not conclusively show that Express Scripts is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to be able to beat estimates. This is not the case here, as you will see below.

Zacks ESP: The Earnings ESP for Express Scripts is 0.00%, as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.74.

Zacks Rank: Express Scripts currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Though a favorable Zacks Rank increases the predictive power of ESP, the company’s 0.00% ESP makes surprise prediction difficult. Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some health care stocks that you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter.

Cancer Genetics, Inc. (NASDAQ:CGIX) has an Earnings ESP of +7.14% and a Zacks Rank #2. The company is scheduled to report second-quarter results on Nov 8.

The Earnings ESP for Premier, Inc. (NASDAQ:PINC) is +5.41% and it carries a Zacks Rank #2. The company is expected to release results on Nov 14.

ImmunoGen, Inc. (NASDAQ:IMGN) has an Earnings ESP of +5.41% and a Zacks Rank #3. The company is scheduled to report second-quarter results on Oct 28.

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