Express Scripts Earnings: Strong Margins Continue, but Net Income Falls

S&P 500 (NYSE:SPY) component Express Scripts Holding Company (NASDAQ:ESRX) reported its results for the first quarter. Express Scripts is a pharmacy benefit management company, providing services like retail network pharmacy management and patient care contact centers to its clients in North America.

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Express Scripts Holding Company Earnings Cheat Sheet for the First Quarter

Results: Net income for Express Scripts Holding Company fell to $267.8 million (55 cents per share) vs. $326.5 million (61 cents per share) a year earlier. This is a decline of 18% from the year-earlier quarter.

Revenue: Rose 9.4% to $12.13 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: Express Scripts Holding Company reported adjusted net income of 73 cents per share. By that measure, the company fell short of mean estimate of 77 cents per share. It beat the average revenue estimate of $11.47 billion.

Quoting Management: “With the close of the Medco acquisition, Express Scripts begins a new chapter as we bring together two outstanding organizations focused on innovation and service,” stated George Paz, chairman and chief executive officer. “We have an unprecedented opportunity to help Americans by making the use of prescription drugs safer and more affordable. As we combine our complementary strengths, we strive to improve health outcomes while lowering healthcare costs for our clients and patients.”

Key Stats:

Last quarter marked the fifth consecutive quarter of increasing gross margins, as the company’s gross margin expanded 0.1 percentage point from the year-earlier quarter to 6.9%. Over that span, margins have grown, on average, 0.3 percentage point per quarter on a year-over-year basis.

Revenue has risen for the last four quarters. Revenue increased 7.1% to $12.1 billion in the fourth quarter of the last fiscal year. The figure rose 2.8% in the third quarter of the last fiscal year from the year earlier and climbed 0.6% in the second quarter of the last fiscal year from the year-ago quarter.

The company’s net income has fallen for two quarters in a row. In the fourth quarter of the last fiscal year, net income fell 11.9% from the year-earlier quarter.

The company has now fallen short of estimates in the last two quarters. In the fourth quarter of the last fiscal year, it missed expectations by 3 cents with net income of 82 cents versus a mean estimate of net income of 85 cents per share.

Looking Forward: Analysts appear increasingly optimistic about the company’s results for the next quarter. The average estimate for the second quarter has moved up from 84 cents a share to 87 cents over the last sixty days. For the fiscal year, the average estimate has moved up from $3.55 a share to $3.65 over the last sixty days.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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