Medco Gives Ground

Medco (MHS) looks like a company on growth hormones.

The giant pharmacy benefit manager blew past first-quarter estimates on Tuesday and once again raised its guidance for the full year. Record sales of generic drugs and rising mail-order activity, both of which boost profit margins, fueled the growth.

Medco's first-quarter net income jumped more than sixfold to $275 million, due in part to the absence of a year-ago charge. But even excluding special items, the company's operating profits more than doubled to $1.03 a share -- toppling the 73-cent analysts' consensus estimate. Revenue of $11.2 billion, up 5.6% from a year ago, came in slightly ahead of analyst targets as well.

Due to that strong performance, Medco has now raised its outlook for the entire year. The company expects to post full-year operating profits of $3.40 to $3.45 a share, with even the low end of that range now ahead of Wall Street estimates.

"Medco's record first quarter continues a consistent record of progressively stronger financial performance across every area of business," the company stated on Tuesday. "As a result of the strong performance, we are again raising our guidance for the year."

Still, after the stock surged last week following a similar performance by rival Express Scripts (ESRX), investors took profits Tuesday. Shares fell $1.59 to $76.43.

For its part, Medco explained that several "moderating factors" -- including lower margins on recent account renewals -- would temper results going forward.