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Stock Analyst Update

Positive News All Around for Express Scripts

The wide-moat pharmacy benefits manager is in a solid long-term position given its cost-saving and efficiency services.

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There wasn’t much to complain about in  Express Scripts(ESRX) fourth quarter, as the pharmacy benefit manager reported positive metrics all around. We believe the firm is in a solid long-term position given its cost-saving and efficiency services, and this dynamic was reflected in its results. Express reported a solid gain for both its top and bottom line, and critically, reported impressive results on a per-claim basis. Revenue, gross profit, and operating profit per claim increased 2%, 6%, and 7%, respectively. Adding to the positive news was management’s outlook for 2018 client retention of 96%-98%. This outlook was boosted by a strong selling season. From our perspective, this points to a healthy operating environment for Express and falls in line with our investment thesis for the PBM. Accordingly, we are reiterating our wide moat rating and $89 fair value estimate.

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Vishnu Lekraj does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.