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Express Scripts (ESRX) Earnings Top, Revenues Lag in Q4

Zacks

St. Louis, MO-based pharmacy benefit manager Express Scripts Holding Company ESRX posted fourth-quarter 2016 adjusted earnings per share of $1.88, beating the Zacks Consensus Estimate by a penny. Furthermore, adjusted earnings jumped 20.5% from the year-ago quarter.

Revenues of $24.8 billion missed the Zacks Consensus Estimate of $26.2 billion and were down 5% on a year-over-year basis.

For the full year, Express Scripts reported revenues of $100.3 billion, down from the year-ago figure of $101.7 billion.


Stock Performance

The price performance of the stock has been unfavorable over the last three months.

Express Scripts registered a negative return of 10.6%, wider than the Zacks classified Medical Services sub-industry’s decline of almost 2.7%. In fact, the current level is also lower than the S&P 500’s solid return of around 6% over the same time frame.

Despite the bearish price trend, a long-term expected earnings growth rate of 11.8% instills our confidence in the stock. Currently, Express Scripts has a Zacks Rank #2 (Buy).

Quarterly Highlights

Adjusted gross profit in the fourth quarter was up 3.3% to $2.3 billion. Adjusted selling, general and administrative expenses were $863.5 million, down 17.7%.

Total adjusted claims amounted to $354.9 million, down 6% year over year due to faster roll-off of the Coventry business.

During the quarter, the company repurchased a total 74.4 million shares under its repurchase program of $5.57 billion during 2016.

Guidance

For the full year, Express Scripts reaffirmed its adjusted earnings per share guidance in the band of $6.82 to $7.02. Notably, this represents growth of 8% at the mid-point of the range on a year-over-year basis.

For the first quarter of 2017, adjusted earnings are estimated in the range of $1.30 to $1.34 per share, representing growth of 7% to 10% on a year-over-year basis. Adjusted claims for the first quarter are projected between $345 million and $355 million.

Stocks to Consider

Better-ranked stocks in the broader medical sector include Glaukos Corporation GKOS, Avinger, Inc. AVGR and Fluidigm Corporation FLDM. Notably, Glaukos Corporation and Fluidigm sport a Zacks Rank #1 (Strong Buy), while Avinger has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Glaukos Corporation has a long-term expected earnings growth rate of approximately 25%. Notably, the stock represents an impressive one-year return of 197%.

Fluidigm Corporation has a long-term expected earnings growth rate of 25%. The stock has added 11.4% over the last three months.

Avinger projects sales growth of 2.3% for the current year. Additionally, the company posted a positive earnings surprise of 27% in the last quarter.

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