Express Scripts Inc. (ESRX) is one of the leading Pharmacy Benefit Management companies in the United States.
The company provides pharmacy management services to health maintenance organizations (HMO’s), health insurers, third party administrators, employers, union benefit plans workers Compensation administrators and governmental health programs.
ESRX reported earnings and revenues right in line with the market consensus. Earnings for the fourth quarter were $0.83 per share from revenues totaling $5.51 billion.
Analysts polled by Thomson Reuters had expected earnings of $0.83 and revenues of $5.45 billion. Earnings were up 20% year over year while revenues were down 0.9%.
Express Scripts attributed the rise in earnings in part to a significant increase in the prescription of generic drugs, which provide a higher margin. Generic use increased from 63.7% of prescriptions to 67.3%.
The company provided guidance for 2009 which was also right in line with analysts’ expectations. Earnings are expected in the range of $3.63 per share to $3.73. Analysts are forecasting earnings of $3.67.
ESRX is currently trading at $53.26 per share, down over 7 % on the day. In mid-September the stock traded at its 52 week peak of $77.97. Over the next 30 days the stock surrendered nearly 40% of its value and reached a low for the year of $48.37 in mid-October. Trading has been in a narrow range since that time.
Stocks of the primary competitors of the company are also currently trading near their lows. Medco (MHS) has dropped 2.5% today and CVS Caremark (CVS) is down nearly 2%.
Losses in the trading value of each of these stocks appear to be mostly driven by the uncertainties surrounding the Obama health care program. Most of the rhetoric from the administration suggests that the cost of health care will be a major target of the reform. Health Maintenance Organizations and insurers are bearing the brunt of the criticism leveled at management of the current system.
Until the details of the health care reform proposals are unveiled and acted upon, companies in the business of delivering health care services are likely to experience a depressed market appetite for their equity interests.
Express Scripts is a highly leveraged company. The company has a debt to equity ratio of 1.63, compared to the industry average of 0.58. The current ratio for Express Scripts is 0.70 versus the industry average of 1.3, and the current ratio of 0.7 trails the industry standard of 1.2.
These financial health ratios are a cause for concern and suggest caution when looking to invest in the company.
This article was written by Jamie Dlugosch, contributor to InvestorPlace Media. For more actionable insights likes this, visit www.InvestorPlace.com.
