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Express Scripts (ESRX)
Express Scripts (ESRX) has a bullish Chaikin Power Gauge rating. This large pharmacy benefits management company has rebounded from disappointment over its 1st quarter earnings report back in April when the company lowered guidance by a few pennies for 2014. The stock formed a double bottom in late April through late July at the 64-65 level, and then began to rally after 2nd quarter earnings were released in late July.
With Friday’s 3% rally ESRX is now within striking distance of its 52 week high of 78.64. Having turned the corner technically the question is whether ESRX’s fundamentals have turned the corner as well.
ESRX made a major acquisition of Medco Health Solutions in 2012 and is still trying to get its arms around customer retention which has been below historic levels. Competitors like CVS Health (CVS) have been able to win customers away from ESRX but the company said in their Julyearnings conference callthat they believe that they have a handle on turning the retention problem around.
In spite of these problems, Express Scripts will likely earn $4.88 per share in 2014, a 13% increase over 2013. Operating cash flow in the 2nd quarter was a strong $736 million and the company bought back 29.9 million shares of stock, over 4% of total shares outstanding. The company expects to buy back an additional 28 million shares in the 2nd half of 2014.
In this new era of biotech blockbuster drugs like Gilead Sciences (GILD) hepatitis C drug Sovaldi, where treatment can run up to $125 thousand per year, health management organizations need companies like ESRX to negotiate better prices and oversee patient education programs. The increasing use of generic drugs is also a long term boon to Express Scripts.
Before the 1st quarter guidance hiccup, ESRX was riding high based on management’s projections of 15% annual growth over the next 5 years. Wall Street’s short-term disillusionment appears to have been overcome and Express Scripts now appears to be in a position to once again outperform the market.
ESRX has a bullish Chaikin Power Gauge rating that is driven by strong Financial Metrics and a bullish Earnings component. The Technical Factors have improved to neutral as the stock has recently broken a 6 month downtrend.
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NASDAQ Chaikin Power Indexes based on the Chaikin Power Gauge Rating
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
