Catamaran Sails Through Another Solid Quarter
We believe its acquisition strategy puts the PBM on the right course.
Catamaran (CTRX) turned in another good quarter as it continues to robustly build its claims base and deliver strong revenue growth. Management also raised the lower end of its adjusted earnings per share outlook to $2.12-$2.22 from $2.10-$2.22. This strong growth is a positive for the pharmacy benefit manager and strengthens its ability to produce significant long-term economic profits. Accordingly, we are reiterating our $57 fair value estimate.
For the quarter, total revenue increased a healthy 57.6%, driven by a near 50% increase in claims volume. As a result of the large claims increase, Catamaran's core PBM operation produced revenue growth of 58.2%. Positively, Catamaran said most of this growth was organic and we believe reflects excellent client employee growth, cross-sales execution, and material new client growth. Additionally, Catamaran's recent Restat acquisition and Cigna contract integrations made a meaningful contribution to the top line. While the profitability of the Cigna contract is expected to remain muted over the course of the next several quarters, management did reiterate that it expects solid accretion from the contract starting in 2015 and beyond.
Vishnu Lekraj does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.