Being one of the top quality companies in the pharmacy benefit management sector,
Express Scripts (
NASDAQ: ESRX) remains an excellent intermediate to long term play.
S. Louis, Missouri based Express Scripts Inc. primarily offers pharmacy benefit management services in North America. The company provides retail network pharmacy management, retail drug card programs, home delivery pharmacy services, benefit design consultation, drug utilization review, drug formulary management programs, and compliance and therapy management programs.
Late in April, the company announced first quarter profit and FY09 financial guidance that beat consensus estimates. Net income jumped 21% to $214.4 million or 86 cents a share, from $177.2 million or 69 cents a share, in the year earlier quarter.Net income from continuing operations for the quarter rose 23% to $214.7 million, or 86 cents a share, from $178.3 million, or 70 cents a share, in the prior year quarter. Quarterly revenue declined slightly to $5.42 billion from $5.49 billion. Analysts on an average were looking for earnings of 82 cents a share on revenue of $5.40 billion for the quarter.
Net income growth at Express Scripts has exceeded 20% in seven of the past eight quarters. The company managed to improve gross margin despite challenging macroeconomic environment. Gross margin increased to 9.85% from 8.49%. The stellar performance of the company can be largely attributed to the increased generics use, which rose to 67.7% of prescriptions from 5.1%.
Looking ahead, the company raised its fiscal year 2009 earnings to a range of $3.67 to $3.77 a share excluding acquisition-related costs, from its previous estimate in the range of $3.63 to $3.73 a share. Analysts currently expect the company to earn $3.68 a share for the full year 2009.
There is no doubt that the company has continued to perform well even in tough market environment. Although other pharmacy operators have suffered amid rising unemployment, Express Scripts has managed to thrive during the worst recession in decades by trying to help its clients keep drug costs under control. The greater use of generic drugs is being seen as a major factor boosting the prospects of the company.
Although generic drugs are less expensive, they carry a higher profit margin for companies. In 2008, generic drug usage among its patients rose 7.5%, while use of brand name drugs dropped 11%. The company expects generic utilization to reach 80% from the current 67.7% over the next two to three years.
