Express Scripts Inc.‘s (ESRX) fourth quarter 2011 adjusted earnings of 82 cents per share (excluding special items) missed the Zacks Consensus Estimate by 3 cents but were 11 cents higher than the year-ago adjusted earnings of 71 cents per share.
Full year 2011 adjusted earnings of $2.97 per share also missed the Zacks Consensus Estimate by 3 cents, but beat the year-ago earnings by 47 cents. The jump in year-over-year earnings is attributable to higher revenues and a lower share count.
Fourth quarter revenues of $12.1 billion surpassed the Zacks Consensus Estimate of $11.6 billion and the year-ago revenues of $11.3 billion. Revenues for the full year ($46.1 billion) were also above the Zacks Consensus Estimate ($45.7 billion) and the year-ago figure ($45.0 billion).
Quarterly Details
Adjusted gross profit for the quarter improved 8.3% to $903.0 million, and adjusted selling, general and administrative expenses went up 8.7% to $217.2 million.
Total claims at Express Scripts for the reported quarter came in at 170.0 million as against 166.7 million in the fourth quarter of 2010. Claims comprise network claims, home delivery claims, and specialty and other claims.
Specialty and other claims include drugs distributed through patient assistance schemes and limited distribution contracts with pharmaceutical manufacturers in addition to Emerging Market claims. Total adjusted claims (thrice the home delivery claims since such claims are typically 90-day claims) of 194.9 million were more than the year-ago adjusted claims of 191.3.
Guidance for 2012
While the company did not provide any guidance for 2012, it mentioned that claims utilization and in-group attrition would remain consistent with current year levels. Client retention level, based on prescription volume, is expected to cross 97%.
Importantly, Express Scripts expects that more than 95% of its client prescription volume will move forward into 2012 without Walgreen Co. (WAG) as a network provider. The company expects claims growth in the range of 0-2% including the impact of three new signature wins.
We expect the company to provide full guidance once it completes the $29.1 billion acquisition of Medco Health Solutions Inc. (MHS) in the first half of 2012. Express Scripts expects the Medco acquisition to be slightly accretive to earnings (excluding integration and deal-related costs and charges) in the first full year after closing and moderately accretive to earnings once fully integrated.
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