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Express Scripts (ESRX) Q1 Earnings Top, Patient Claims Fall

By Zacks Investment ResearchStock MarketsMay 02, 2018 10:31PM ET
Express Scripts (ESRX) Q1 Earnings Top, Patient Claims Fall
By Zacks Investment Research   |  May 02, 2018 10:31PM ET
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Express Scripts Holding Company (NASDAQ:ESRX) posted first-quarter 2018 adjusted earnings of $1.77 per share, which beat the Zacks Consensus Estimate by a penny. Further, adjusted earnings improved 33% year over year.

Revenues of $24.78 billion edged past the Zacks Consensus Estimate of $24.76 billion and inched up 0.5% year over year. The upside was driven by operational cost improvement backed by focus on technology, digital tools, home delivery and specialty services.

The stock has a Zacks Rank #4 (Sell). Express Scripts has outperformed the industry in a year’s time. The stock has gained 18.9% during this period, compared with the industry's rise of 12.6%

Q1 Patient Claim Volume Details

Express Scripts’ first-quarter 2017 witnessed year-over-year declines in patient claims.

Adjusted network claims were 262.8 million, down 1.6% year over year.

Adjusted home delivery and specialty claims were 77.3 million in the reported quarter, down 8.6% year over year.

As a result, net adjusted claims in the first quarter were 340.1 million, down 3.3% on a year-over-year basis. The decline was primarily driven by the loss of certain public-sector clients.

Express Scripts Holding Company Price, Consensus and EPS Surprise

Margin Details

Adjusted gross profit in the first quarter was $2.94 billion, up 0.6% year over year. As a percentage of revenues, adjusted gross margin was flat year over year.

Adjusted selling, general and administrative expenses were $917.8 million, up 12.2% from the prior-year quarter.

Express Scripts Getting Acquired

Integrating medical care and pharmacy benefits under one roof, Express Scripts recently announced that it is getting acquired by Cigna Corporation (NYSE:CI), a global health insurance company. The acquisition is expected to be concluded by Dec 31, 2018. Cigna will take over Express Scripts in a cash and stock transaction worth $67 billion.

Under the terms of the deal, Cigna will pay $48.75 in cash and 0.2434 shares of stock of the newly-combined company. Upon closure, Express Scripts’ shareholders will own approximately 36% of the combined company. The transaction will result in total cost synergies of $650 million.


Adjusted earnings per share for the second quarter of 2018 are estimated in the range of $2.18-$2.22, which represents growth of 26-28% year over year. Notably, the Zacks Consensus Estimate for earnings is currently pegged at $2.29, which is above the projected range.

The company expects total adjusted claims for the second quarter in the range of 335-345 million, of which 280-290 million are attributable to the core business.

For 2018, adjusted earnings are estimated in the band of $9 to $9.14, significantly below the previous range of $9.27-$9.47 per share. This is because of suspension of share-repurchase program. Notably, the Zacks Consensus Estimate for earnings is currently peged at $9.32, which lies significantly above the guidance.

Revenues are expected in the band of $99 billion to $102 billion. The Zack Consensus Estimate for revenues in 2018 is currently pegged at $100.86 billion, which lies within the guidance.

Adjusted EBITDA is expected between $7.6 billion and $7.8 billion.

In Conclusion

Express Scripts ended the first quarter on a strong note, beating the consensus mark on both the counts. However, a lackluster guidance for 2018 is indicates concerns for the stock. Moreover, the company faces stiff competition, which raises concern.

Buoyed by strong results in the quarter, Express Scripts’ enterprise value initiative is estimated in the range of $600-$650 million. Notably, management expects cumulative savings of nearly $1.2 billion by 2021.

Q1 Earnings of MedTech Majors at a Glance

A few better-ranked stocks in the broader medical space, which reported solid earnings this season are, Baxter International Inc. (NYSE:BAX) , Varian Medical Systems, Inc. (NYSE:VAR) and Intuitive Surgical, Inc. (NASDAQ:ISRG) .

While Intuitive Surgical and Varian sport a Zacks Rank #1 (Strong Buy), Baxter carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical reported adjusted earnings of $2.44 per share, which surpassed the Zacks Consensus Estimate by 22.6%. Revenues totaled $848 million, which beat the Zacks Consensus Estimate by 10.6%.

Varian reported second-quarter fiscal 2018 adjusted earnings of $1.15 per share, which beat the Zacks Consensus Estimate of $1.06. Adjusted earnings improved 27.8% on a year-over-year basis.

Baxter reported first-quarter 2018 adjusted earnings per share of 70 cents, which beat the Zacks Consensus Estimate by 12.9% and improved from the year-ago quarter’s figure of 58 cents.

5 Medical Stocks to Buy Now

Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.

New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.

Click here to see the 5 stocks >>

Varian Medical Systems, Inc. (VAR): Free Stock Analysis Report

Intuitive Surgical, Inc. (ISRG): Free Stock Analysis Report

Baxter International Inc. (BAX): Free Stock Analysis Report

Express Scripts Holding Company (ESRX): Free Stock Analysis Report

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Express Scripts (ESRX) Q1 Earnings Top, Patient Claims Fall

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Express Scripts (ESRX) Q1 Earnings Top, Patient Claims Fall

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