Express Scripts (ESRX) Stock Falls on Analyst Downgrade

NEW YORK (TheStreet) -- Express Scripts (ESRX) shares are down 1.8% to $85.56 in trading on Monday after the pharmacy benefit management organization's stock was downgraded to "market perform" from "outperform" by analysts' at Raymond James.

The firm also removed the company's $92 price target in response to Friday's revelation that the company was not in the running to purchase health insurance company Humana (HUM).

Humana shares rose 20% in trading on Friday following reports that it is exploring a possible sale using Goldman Sachs (GS) as fellow insurers Aetna (AET) and Cigna  (CI) are among the parties interested in a deal.

Today Humana shares are up 0.2% to $21.5.17,while Aetena and Cigna shares are up 1.11% and 2.68%, respectively.

Separately, Humana's CEO sent an internal email to employees today acknowledging the distracting nature of the press reports about the company and encouraging employees to continue to do their jobs.

TheStreet Ratings team rates EXPRESS SCRIPTS HOLDING CO as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate EXPRESS SCRIPTS HOLDING CO (ESRX) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel its strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • EXPRESS SCRIPTS HOLDING CO has improved earnings per share by 42.9% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, EXPRESS SCRIPTS HOLDING CO increased its bottom line by earning $2.66 versus $2.31 in the prior year. This year, the market expects an improvement in earnings ($5.45 versus $2.66).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Health Care Providers & Services industry. The net income increased by 34.4% when compared to the same quarter one year prior, rising from $328.30 million to $441.10 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 13.2%. Since the same quarter one year prior, revenues slightly increased by 5.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.60, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.45 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • Powered by its strong earnings growth of 42.85% and other important driving factors, this stock has surged by 25.51% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • You can view the full analysis from the report here: ESRX Ratings Report

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