(By Mayur Pahilajani - iStockAnalyst Writer)
Franklin Lakes, N.J. – If the stocks of insurance giants like American International Group, Inc. (NYSE: AIG) seem unreliable in the current challenging economic period, then healthcare stocks like Medco Health Solutions Inc. (NYSE: MHS) can add some charm to your portfolio.
The Franklin Lakes, New Jersey-based company today disclosed its fourth-quarter results with a 14 percent rise in earnings and said that it will continue posting net profit of up to 20 percent for 2009. The company handles prescriptions of 20 percent Americans and offers drug benefit services to health plan sponsors and members.
In fact, 22 out of 27 market analysts surveyed by Bloomberg before the financial results have recommended a “Buy” rating on the stock, with only 5 analysts have it on “Hold” rating. Medco's profit was helped by a rise in sales of more valuable generic drugs and home delivery prescriptions.
The pharmacy benefit managers have gained from generic drugs more than their branded drug counterparts.
Earnings per share for full-year 2009 are expected in the range of $2.45 to $2.55, reflecting 15 to 20 percent growth over 2008.While, excluding amortization of intangible assets from the 2003 spin-off, the profit could be between $2.67 to $2.77 in the same period.
The market analysts on Wall Street have a consensus on its profit estimate at $2.69 a share on revenue of $54.53 billion in 2009.
The stock of the company has shown bullish sentiment as it edges towards its 52-week high of $52, from its low of $29.80. Its P/E ratio is at 22.78 with average volume of 3.55 million. For 2009 till-date, Medco has repurchased 2.8 million shares for a total cost of $116.7 million at an average per-share cost of $41.86.
Net earnings in the final three months of 2008 were at $274.4 million, or 54 cents a share, higher from $207.6 million, or 38 cents, earned in the same quarter the previous year. Revenue of the firm was $12.96 billion, up by almost 14 percent from $11.38 billion in the prior year.
Amid weakened economy, the revenue of the company increased based on “significant” new client wins and price inflation on brand-name drugs, partially offset by higher volumes of lower-cost generic drugs, the company said.
"Our disciplined financial strategies are driving increased cash balances, cash flows from operations and return on invested capital," Richard J. Rubino, chief financial officer, said. "Given the tight credit markets and uncertain economic times, we are creating our own liquidity, which will continue to fuel long-term shareholder returns."
Excluding special items, Medco said earnings would have been 59 cents a share, beating the market analysts' estimation of 57 cents per share on an average basis.
Mail-order prescription volume jumped by 9.4 percent to a record 26.7 million in the quarter, while retail prescription volume increased by 1.0 percent to 118.3 million.
The company also benefited from the rise in total prescription volume, adjusting for the difference in days supply between mail-order and retail, which increased to 198.1 million, a 4.3 percent increase over the fourth quarter of 2007.
For the full-year 2008, total prescription volume was 6.4 percent higher to 795.9 million. Mail-order prescription volume rose by 11.6 percent to a record 105.8 million and retail prescription volume was up by 3.3 percent to 480.2 million.
Just after the bell, shares of the company were rising by $1.32 or 2.96 percent to $45.97. The stock has advanced almost 6.5 percent this year through yesterday. While, the Standard & Poor's 500 index has lost around 18 percent so far in 2009.
Source: http://www.istockanalyst.com/article/viewiStockNews/articleid/3063061
