Wall Street doesn't like surprises, and Express Scripts Holding
Co. handed it a big one Tuesday. In response, shares of the nation's
largest pharmacy benefits manager fell the most in more than 10
On a third-quarter conference call Tuesday, Express Scripts Chairman and Chief Executive George Paz expanded on the company's unexpected warning that the Street's 2013 forecasts for it were "overly aggressive." Analysts had been projecting earnings per share of $4.50 next year, according to Bloomberg News.
St. Louis-based Express Scripts, which acquired Medco Health Solutions Inc. of Franklin Lakes earlier this year, is predicting that because of the still-troubled economy next year, business will be tougher than analysts expect. Paz declined to offer 2013 guidance.
"This is a very competitive marketplace," Paz said. "We deal with very sophisticated clients, and they want a bigger piece of the pie."
Express Scripts shares fell $7.73, or 12.3 percent -- the most since May 2002 -- to $55.15 Tuesday, in Nasdaq Stock Market trading.
The company said its large clients have pulled back on hiring or used contractors who don't get medical benefits. Small and medium- sized companies were waiting until after the election to make health care decisions, Paz said.
"As a result, the current weak business climate and the unemployment outlook will likely result in significant in-group member attrition in 2013, continuing low [drug] utilization rates and increased client demands and expectations," Paz said.
Express Scripts' net income in the third quarter rose 21 percent to $391.4 million, or 47 cents a share, from $324.7 million, or 66 cents, in the year-ago period. Adjusted earnings per share were $1.02, versus 79 cents a year ago. Revenue was $27 billion, more than twice the year-ago period.
Chief Financial Officer Jeffrey Hall said the company expects 2012 earnings per share to range from $3.65 to $3.75. Synergies from the integration of Medco "continue to be accelerated into 2012, which contributed to strong earnings for the quarter," Hall said.
Express Scripts had stock-based compensation expenses of $95.3 million in the third quarter, compared with $10.9 million a year ago. The increase was due to "the termination of certain Medco employees," the company said in a securities filing.
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