Medco Health Solutions Inc. Earnings Cheat Sheet: Net Income Falls Again

S&P 500 (NYSE:SPY) component Medco Health Solutions Inc. (NYSE:MHS) reported its results for the third quarter. Medco Health Solutions offers clinically-driven pharmacy services for private and public employers, health plans, labor unions, and government agencies.

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Medco Health Solutions Earnings Cheat Sheet for the Third Quarter

Results: Net income for Medco Health Solutions Inc. fell to $355.4 million (90 cents per share) vs. $371.5 million (85 cents per share) a year earlier. This is a decline of 4.3% from the year earlier quarter.

Revenue: Rose 4.1% to $16.98 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: MHS reported adjusted net income of $1.07 per share. By that measure, the company beat the mean estimate of $1.05 per share. Analysts were expecting revenue of $17.06 billion.

Quoting Management: “Medco experienced a strong third-quarter, including record EPS even when including merger-related expenses associated with the pending merger with Express Scripts. Our gross margins recovered to a healthy 6.9 percent, and our EBITDA per adjusted script achieved a record $3.43 excluding merger-related expenses. Along with this positive financial performance, our clients and members saved approximately $700 million from higher generic utilization. Looking forward to 2012, the guidance we provided demonstrates expectations for continued strength building upon what is turning out to be a very successful 2011. The generic wave for 2012 is forecasted to be strong, and our clients and members are expected to save approximately $6.5 billion in 2012 from increased generic utilization, which also has the effect of lowering our revenues due to the significant price difference in generics compared to brand-name drugs,” said David B. Snow Jr., chairman and chief executive officer of Medco.

Key Stats:

Revenue has risen the past four quarters. Revenue increased 4.1% to $17.07 billion in the second quarter. The figure rose 4.3% in the first quarter from the year earlier and climbed 11.1% in the fourth quarter of the last fiscal year from the year-ago quarter.

The company has now seen net income fall in each of the last two quarters. In the second quarter, net income fell 4% from the year earlier quarter.

The company has now topped analyst estimates for the last three quarters. It beat the mark by 2 cents in the second quarter and by 3 cents in the first quarter.

Looking Forward: Analysts appear increasingly optimistic about the company’s results for the next quarter. The average estimate for the fourth quarter has moved up from $1.17 a share to $1.18 over the last seven days. For the fiscal year, the average estimate has moved down from $4.09 a share to $4.08 over the last sixty days.

Competitors to Watch: Express Scripts, Inc. (NASDAQ:ESRX), BioScrip Inc. (NASDAQ:BIOS), Catalyst Health Solutions, Inc. (NASDAQ:CHSI), UnitedHealth Group Inc. (NYSE:UNH), CVS Caremark Corporation (NYSE:CVS), Walgreen Company (NYSE:WAG), Aetna Inc. (NYSE:AET), Magellan Health Services, Inc. (NASDAQ:MGLN), SXC Health Solutions Corp. (NASDAQ:SXCI), and Birner Dental Mgmt. Services (NASDAQ:BDMS).

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(Source: Xignite Financials)