Here's Why You Should Steer Clear of Express Scripts for Now
Express Scripts Holding Company ESRX has underperformed the broader industry in the last three months. The company’s shares have gained 8.2% versus the industry’s rally of 8.8%.
A rapidly changing healthcare environment in the United States, loss of clients and stiff competition in niche space are significant headwinds for the company.
Battered by such challenges, the Zacks Consensus Estimate for second-quarter adjusted earnings is currently pegged at $2.20 per share, down 1.8% in the last two months. The same for revenues is pinned at $25.34 billion, reflecting a year-over-year decline of 0.01%.
The stock has a Zacks Rank #4 (Sell).
Below we take a sneak peek at the major issues plaguing Express Scripts.
Loss of Patient Claims
The MO-based pharmacy benefit manager lost certain public-sector clients, which resulted in a 1.6% year-over-year decline in adjusted network claims in the last reported quarter.
Moreover, adjusted home delivery and specialty claims totaled 77.3 million in the quarter, down 8.6% year over year.
Express Scripts Getting Acquired
Express Scripts recently announced that it is getting acquired by Cigna Corporation, 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.
Competition Rife
Express Scripts faces intense competition in the Patient Benefit Management industry from independent PBMs like MedImpact and Navitus Health Solutions. Moreover, the PBM space is dominated by bigwigs like CVS, Aetna and Cigna, among others.
Guidance Downbeat
For 2018, Express Scripts’ adjusted earnings per share are estimated in the band of $9 to $9.14, significantly below the previous range of $9.27-$9.47.
Key Picks
Some better-ranked stocks in the broader medical space are Abiomed, Inc. ABMD, Stryker Corporation SYK and Intuitive Surgical Inc. ISRG.
Intuitive Surgical has an expected long-term earnings growth rate of 12.1%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Stryker has a projected long-term earnings growth rate of 9.7%. The stock carries a Zacks Rank #2 (Buy).
Abiomed has a projected long-term earnings growth rate of 27%. The stock holds a Zacks Rank #1.
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