Express Scripts Holding Company (ESRX) Shares Rise On High Guidance

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Express Scripts Holding Company (NASDAQ:ESRX) rose 6.6%, the most in six months, on higher than expected profit forecast. Express Scripts Holding Company (NASDAQ:ESRX) gave 2013 guidance range of $4.20 to $4.30, versus consensus. Guidance for a share count of 825-835M implies at least a modest buyback in 2013.The guidance should help address some of the uncertainty that was weighing on shares in recent months.

Express Scripts Holding Company (ESRX) Shares Rise On High Guidance

Implied EBITDA per adj. Rx of $4.45-$4.57 beat consensus forecasts. Key growth drivers embedded in guidance include improvement in COGS and SG&A spend offset by UNH, and selling season related attrition. Revenue of $27.4B and adjusted EPS of $1.05 compares to consensus of $27.2B and $1.04. Adjusted GM of 8.6%. Adjusted claims came in at 411 million. EBITDA/ Rx of $4.01 fell below consensus of $4.06, which is likely due to higher SG&A.

Revenues more than doubled with the Medco contribution, and were slightly ahead of plan, primarily on a higher revenue per script. Total adj. prescriptions rose 111%. The gross margin surged 114 bps yoy (52 bps above plan) on higher generic substitution (+500 bps), but higher administrative spending was partially offsetting. All in, the EBITDA margin rose 17 bps, 19 bps ahead of plan. Cash flow of $2.7 million facilitated another $1.2 billion in deleveraging, bringing its gross-debt-to-LTM-EBITDA ratio to 2.9x, approaching its target ratio of 2.0x. Cash on the balance sheet rose $1.5 billion sequentially to $2.8 billion.

On the conference call, Jeff Hall – Express Scripts Holding Company (NASDAQ:ESRX) – CFO discussed some of the guidance numbers, noting:

This strong year positions us well for 2013. We expect to achieve 2013 earnings per share in a range of $4.20 to $4.30, which represents growth of 12% to 15% over 2012. Adjusted claims are expected to increase approximately 5% to 7% over 2012. This increase in claims reflect the additional quarter of claims from Medco, new business wins, utilization of 0% to 1%, and these increases are partially offset by the roll off of approximately half of the United claims during 2013. SG&A in the year is expected to decline approximately 8% to 10%, resulting from the realization of additional synergies, lower management incentive compensation, and the sale of our Liberty business in December of 2012. Both gross profit and SG&A for Liberty were approximately $135 million in 2012. These decreases were partially offset by adding an additional quarter of Medco. EBITDA per Rx will increase 15% to 18% over 2012.

At the time of this writing, shares of Express Scripts Holding Company (NASDAQ:ESRX) are currently up 1.84% to $56.59 a share.

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