Express Scripts

Express Scripts Holding Company (NASDAQ:ESRX), the largest pharmacy benefit manager in the United States, is up in early trading despite missing the consensus estimate for first quarter earnings due to increased prescription volume and much higher revenue than expected. Revenue for the first quarter of 2012 increased 9.4 percent to total $12.1 billion, greatly surpassing analyst expectations of $11.5 billion in sales. The revenue growth was on the back of increased prescription shipments to customers via mail, which was up 6 percent from a year earlier. The firm shipped 14 million prescriptions this quarter.

Despite the increase in first quarter revenues surpassing analyst expectations, the firm missed the consensus profit estimate of 77 cents per share, coming in at only 73 cents per share. While the firm was successful in expanding the top line as well as operating margins, general and administrative expenses increase and reduced total profit margins. The growth in generic drugs in the past years has allowed higher volume sales, but the lowest margin pharmaceuticals may negatively impact margins in many firms.

Overall expectations for the 2012 fiscal year remain on track with consensus estimates of $3.64 per share, with the firm providing guidance in the range of $3.36 – $3.66 per share.

Express Scripts Holding Company (NASDAQ:ESRX) recently required Medco Health in the second quarter, giving the firm access to over one hundred million consumers. Express Scripts expects the acquisition to be “slightly accretive” to earnings during integration and “moderately accretive” once synergies of up to $1 billion are recognized.

Walgreen Company (NYSE:WAG) indicated that they would be exiting Express Script’s network due to insufficient reimbursement terms, however, it seems that Express Scripts has been largely unaffected as it has indicated a customer retention rate of 97%. It seems that though Express Script’s customers are simply moving to other firms such as CVS, Wal-Mart Stores, Inc. (NYSE:WMT) and Rite Aid (RAD), as Walgreen has lost 85% of Express Script customers in January of 2012.

Express Scripts is up 3.42% to $56.20 at 11:55AM on the NASDAQ.