Express Scripts Holding Co. (ESRX:US), the largest U.S. pharmacy benefits manager, plunged the most in a decade after saying analysts’ estimates for profit growth in 2013 are “overly aggressive.”
Express Scripts tumbled 12 percent to $55.15 at 4 p.m. New York time, the most since May 2002, after the company said in statement yesterday that a “weak business climate and the unemployment outlook” may lead to a loss of members, depressed drug utilization and “increased client demands.” Analysts had expected the St. Louis-based company to have profit of $4.50 a share next year, according to the average of 22 estimates compiled by Bloomberg.
“Our plans are saying that they expect attrition,” Chairman and Chief Executive Officer George Paz told analysts on a conference call today.
Express Scripts represents 3,600 clients including large and small plans in all 50 states with 100 million members, Paz said. The company, which said it will give specific earnings guidance in February, acts as a middleman between employers, health plans and drug companies, with profits tied to clients’ drug costs.
“It’s a tough pricing environment, and they’re anticipating a lot of their customers will go out to bid in the 2014 selling season,” said Bret Jones, an Oppenheimer & Co. analyst in New York who is maintaining his outperform rating on the stock. That’s not unusual after a merger, he said.
Brian Tanquilut, an analyst with Jefferies & Co. in Los Angeles, downgraded the stock to hold from buy. Express Scripts had gained (ESRX:US) 39 percent in the year ended yesterday.
Express Scripts bought Medco Health Solutions Inc. for about $29 billion in April to become the largest pharmacy- benefits manager in the U.S. Smaller competitors including Catamaran Corp. (CCT) had reported seeing more requests for proposals from potential clients since that acquisition, Jones said.
Catamaran said last week it won a contract to cover 180,000 Target Corp. (TGT:US) employees starting in April. Express Scripts has Target’s business now.
Express Scripts gave the 2013 outlook as it announced third-quarter net income, which rose 21 percent to $391.4 million, or 47 cents a share. Profit excluding one-time items was $1.02 cents a share, exceeding the average estimate of $1. Revenue doubled to $27 billion, falling short of analysts’ expectations for $27.5 billion, the average of 19 estimates.
Whether today’s U.S. presidential election provides more certainty in the economy, the outlook will be clearer in January when Express Scripts gets enrollment data, Paz said.
There are no restrictions on the ability of Express Scripts to conduct share buybacks, Paz said.
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