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Well Tim's back hurts so now we can't play with him at Hidden Creek. Instead, Tim was most excellent and set the Titans up to play at the Ridge instead. Tim is most excellent.
Don’t you hate it when people can’t leave well enough alone? Don’t sweat the small stuff. Let sleeping dogs lie. When you don’t know what to do, you should stick to the script. By and large, though, a writer leaves a work the way it is for a reason. In general, writers should be trusted to be the best judges of their own work. The rest of us should stick to the script.
Today I bought ESRX Express Scripts at 60.78. I will sell it in 4 to 6 weeks at 70.09. Here’s why I like ESRX.
Well for one, look at this amazing chart. The market loves this stock, and for good reason. Don’t expect me to throw a sophisticated value analysis on this company. This isn’t your typical momentum value play. This is a value creation story. It’s going to be very difficult to dig into the financials of this company because it just completed the merger of all mergers. By buying Medco, ESRX is far and away the Gigantor of the prescription drug business. At a market cap of 49 billion dollars, basically ESRX is the biggest drug dealer in the universe….and I’m not talking about the blunts that Lil Wayne raps about. Following the Medco merger, Express Scripts has the ability to influence the pharmaceutical spending of more than 100 million individuals.
Express Scripts makes the use of prescription drugs safer and more affordable for tens of millions of consumers through thousands of employers, government, union and health plans.
Founded in 1986 and never owned by a drug manufacturer, Express Scripts aligns its interests with those of plan sponsors and their members. This legacy of independence means that the company's programs and original, in-depth research on the pharmacy benefit serve its clients. Express Scripts drives to lowest net cost by enabling better health and value at the consumer level. As evidence, Express Scripts' generic fill rate leads the industry. Express Scripts handles millions of prescriptions each year through home delivery from the Express Scripts Pharmacy and at retail pharmacies.
According to the CEO Mr. Paz…(it’s Paz…not Spaz)…this Medco merger is the key that unlocks the cost door. He said recently, “The beauty of this deal is bringing a clinical expertise. Medco had developed therapeutic resource centers, where they got their pharmacist to have specialties in things like diabetes, heart problems and asthma. Express Scripts took a different approach. We tried to understand why people do what they do with behavioral economics, which is: What drives human behaviors? What drives people to do what they did? By combining those two pieces, we get that much stronger.” It’s a candy mint. It’s a breath mint. It’s two mints in one! But I digress….
Express Scripts Holding Company provides a range of pharmacy benefit management (PBM) services in North America. It offers healthcare management and administration services on behalf of its clients, which include health maintenance organizations, health insurers, third-party administrators, employers, union-sponsored benefit plans, workers’ compensation plans, and government health programs. The company’s integrated PBM services comprise network claims processing, home delivery services, patient care and direct specialty and fertility home delivery to patients, benefit plan design consultation, drug utilization review, formulary management, drug data analysis services, distribution of injectable drugs to patients’ homes and physicians’ offices, bio-pharma services, and fulfillment of prescriptions to low-income patients through manufacturer-sponsored patient assistance programs. It is also involved in the distribution of pharmaceuticals and medical supplies to providers and clinics; and healthcare administration and implementation of consumer-directed healthcare solutions.
Here’s the kicker. We’re all looking for stocks to invest our money in. We wonder which industry is going to provide the most growth. ESRX already has 40% of the pie when it comes to pharmacy benefit management services. By 2014, growth in prescription drug spending is expected to increase sharply to 10.7 percent, which is 5.1 percent and $15.8 billion higher than projected in the absence of the Patient Protection and Affordable Care Act, otherwise known as healthcare reform. This projected acceleration is driven mainly by an expectation that the newly insured will substantially increase their use of medicines. Looking past the horizon, prescription drug spending growth is expected to average 7.2 percent between 2015 and 2020. Now who wouldn’t want to invest in a SAFE business that grows at a rate of 7.2%?? We’re getting older, living longer and taking more drugs. I got a feeling that ESRX will do better than the kid with the baseball cap on backwards selling dope at the playground. That’s right choo choo….ESRX processes 1.5 billion prescriptions a year.
While the stock has been doing well, (up about 30% in the last 12 months) the current stock price fails to account for likely synergies from the merger with Medco. We’ll see it materialize in the next few earnings reports. That’s the value creation I was talking about. The now combined entity will also have greater resources to encourage generic substitution and adherence to prescriptions. They swing the hammer. For example, at the end of 2011, Walgreens walked away from a partnership with Express Scripts, trying to act all big and bad. 95% of Express Scripts clients stayed with ESRX even though ESRX dumped Walgreens. So Walgreens got all faceful and came crawling back to ESRX. So now Walgreens is going to have to choke the bone every time ESRX snaps their fingers. Sorry fellas, that’s business.
With the Medco merger, ESRX has better purchasing along with increased scale. They are the 900 lb gorilla. They are finding so many synergies in the merger, it’s not funny. This could be the greatest merger in the history of Wall Street. I kid you not. The merger benefits could help Express Scripts reach its target of $1 billion in cost savings alone. Even if they only increase their operating margin by 1%, that will be a 20% increase over their existing 5% margin…this will drop down to the bottom line in a big way. This will drive 20% earnings growth for several years to come, which will mean this stock is going to shoot up and up. I got news for you, the operating margin is going to increase by more than 1%. This stock is a steal here. There is very little risk in the earnings stream. This was about as big a merger as you can get away with, crushing competition and providing tremendous economies of scale. What a coup.
EBITDA for the last quarter was $1.5 billion, and EBITDA per RX was up 14% versus prior year. Cash from operations was $726 million, a 58% increase from last year. Including Medco's first quarter performance, year-to-date cash from operations is approximately $2 billion.
As a result of strong performance in the first half of the year and the accelerated realization of synergies, ESRX increased guidance range for 2012 (wow..what a surprise). They now expect EPS for the year, excluding transaction, integration and amortization expenses, to be in a range of $3.60 to $3.75, representing growth of 24% over 2011 at the midpoint.
Here’s what chief Spaz…I mean CEO Paz had to say:
“Medicaid will continue to be a very important component of our business. It's mostly managed through our health plan side, our managed care division. And many, many of our clients have a focus on both Medicare and Medicaid. Our job is to produce the tools and reporting and the information that they need to meet the needs of the different states as they roll out their programs. So it clearly, end of this year, Medicaid has been a big driver for us, and I suspect it's going to stay that way as we go into 2013 and '14. It's an area of growth -- of significant growth. So it's something we're very focused on.”
“Our financial performance for the quarter and our outlook for the year reflects the strength of our value proposition, confidence in our ability to successfully integrate our business and our unprecedented opportunity to make the use of medicine safer and more affordable, which is exactly what our plan sponsors need now.”
“We're really excited about where we sit. We believe that as pharmaceutical manufacturers have continued to raise prices, as clients continue to look for opportunities, what's really been fun, I think, over the last 14, 15 years that I've been here is to watch the clients as they've grown, and they've had a better understanding of value that comes through the PBM. And our tools have only gotten sharper and better, and the clients have become more receptive. And we're excited about the position we sit in. We're excited about our future.”
You think this guy is excited? What a spaz! I’m the one who should be excited with all of the money I’m going to make investing in this stock.
I am HUGE!
$$$MR. MARKET$$$
Don’t you hate it when people can’t leave well enough alone? Don’t sweat the small stuff. Let sleeping dogs lie. When you don’t know what to do, you should stick to the script. By and large, though, a writer leaves a work the way it is for a reason. In general, writers should be trusted to be the best judges of their own work. The rest of us should stick to the script.
Today I bought ESRX Express Scripts at 60.78. I will sell it in 4 to 6 weeks at 70.09. Here’s why I like ESRX.
Well for one, look at this amazing chart. The market loves this stock, and for good reason. Don’t expect me to throw a sophisticated value analysis on this company. This isn’t your typical momentum value play. This is a value creation story. It’s going to be very difficult to dig into the financials of this company because it just completed the merger of all mergers. By buying Medco, ESRX is far and away the Gigantor of the prescription drug business. At a market cap of 49 billion dollars, basically ESRX is the biggest drug dealer in the universe….and I’m not talking about the blunts that Lil Wayne raps about. Following the Medco merger, Express Scripts has the ability to influence the pharmaceutical spending of more than 100 million individuals.
Express Scripts makes the use of prescription drugs safer and more affordable for tens of millions of consumers through thousands of employers, government, union and health plans.
Founded in 1986 and never owned by a drug manufacturer, Express Scripts aligns its interests with those of plan sponsors and their members. This legacy of independence means that the company's programs and original, in-depth research on the pharmacy benefit serve its clients. Express Scripts drives to lowest net cost by enabling better health and value at the consumer level. As evidence, Express Scripts' generic fill rate leads the industry. Express Scripts handles millions of prescriptions each year through home delivery from the Express Scripts Pharmacy and at retail pharmacies.
According to the CEO Mr. Paz…(it’s Paz…not Spaz)…this Medco merger is the key that unlocks the cost door. He said recently, “The beauty of this deal is bringing a clinical expertise. Medco had developed therapeutic resource centers, where they got their pharmacist to have specialties in things like diabetes, heart problems and asthma. Express Scripts took a different approach. We tried to understand why people do what they do with behavioral economics, which is: What drives human behaviors? What drives people to do what they did? By combining those two pieces, we get that much stronger.” It’s a candy mint. It’s a breath mint. It’s two mints in one! But I digress….
Express Scripts Holding Company provides a range of pharmacy benefit management (PBM) services in North America. It offers healthcare management and administration services on behalf of its clients, which include health maintenance organizations, health insurers, third-party administrators, employers, union-sponsored benefit plans, workers’ compensation plans, and government health programs. The company’s integrated PBM services comprise network claims processing, home delivery services, patient care and direct specialty and fertility home delivery to patients, benefit plan design consultation, drug utilization review, formulary management, drug data analysis services, distribution of injectable drugs to patients’ homes and physicians’ offices, bio-pharma services, and fulfillment of prescriptions to low-income patients through manufacturer-sponsored patient assistance programs. It is also involved in the distribution of pharmaceuticals and medical supplies to providers and clinics; and healthcare administration and implementation of consumer-directed healthcare solutions.
Here’s the kicker. We’re all looking for stocks to invest our money in. We wonder which industry is going to provide the most growth. ESRX already has 40% of the pie when it comes to pharmacy benefit management services. By 2014, growth in prescription drug spending is expected to increase sharply to 10.7 percent, which is 5.1 percent and $15.8 billion higher than projected in the absence of the Patient Protection and Affordable Care Act, otherwise known as healthcare reform. This projected acceleration is driven mainly by an expectation that the newly insured will substantially increase their use of medicines. Looking past the horizon, prescription drug spending growth is expected to average 7.2 percent between 2015 and 2020. Now who wouldn’t want to invest in a SAFE business that grows at a rate of 7.2%?? We’re getting older, living longer and taking more drugs. I got a feeling that ESRX will do better than the kid with the baseball cap on backwards selling dope at the playground. That’s right choo choo….ESRX processes 1.5 billion prescriptions a year.
While the stock has been doing well, (up about 30% in the last 12 months) the current stock price fails to account for likely synergies from the merger with Medco. We’ll see it materialize in the next few earnings reports. That’s the value creation I was talking about. The now combined entity will also have greater resources to encourage generic substitution and adherence to prescriptions. They swing the hammer. For example, at the end of 2011, Walgreens walked away from a partnership with Express Scripts, trying to act all big and bad. 95% of Express Scripts clients stayed with ESRX even though ESRX dumped Walgreens. So Walgreens got all faceful and came crawling back to ESRX. So now Walgreens is going to have to choke the bone every time ESRX snaps their fingers. Sorry fellas, that’s business.
With the Medco merger, ESRX has better purchasing along with increased scale. They are the 900 lb gorilla. They are finding so many synergies in the merger, it’s not funny. This could be the greatest merger in the history of Wall Street. I kid you not. The merger benefits could help Express Scripts reach its target of $1 billion in cost savings alone. Even if they only increase their operating margin by 1%, that will be a 20% increase over their existing 5% margin…this will drop down to the bottom line in a big way. This will drive 20% earnings growth for several years to come, which will mean this stock is going to shoot up and up. I got news for you, the operating margin is going to increase by more than 1%. This stock is a steal here. There is very little risk in the earnings stream. This was about as big a merger as you can get away with, crushing competition and providing tremendous economies of scale. What a coup.
EBITDA for the last quarter was $1.5 billion, and EBITDA per RX was up 14% versus prior year. Cash from operations was $726 million, a 58% increase from last year. Including Medco's first quarter performance, year-to-date cash from operations is approximately $2 billion.
As a result of strong performance in the first half of the year and the accelerated realization of synergies, ESRX increased guidance range for 2012 (wow..what a surprise). They now expect EPS for the year, excluding transaction, integration and amortization expenses, to be in a range of $3.60 to $3.75, representing growth of 24% over 2011 at the midpoint.
Here’s what chief Spaz…I mean CEO Paz had to say:
“Medicaid will continue to be a very important component of our business. It's mostly managed through our health plan side, our managed care division. And many, many of our clients have a focus on both Medicare and Medicaid. Our job is to produce the tools and reporting and the information that they need to meet the needs of the different states as they roll out their programs. So it clearly, end of this year, Medicaid has been a big driver for us, and I suspect it's going to stay that way as we go into 2013 and '14. It's an area of growth -- of significant growth. So it's something we're very focused on.”
“Our financial performance for the quarter and our outlook for the year reflects the strength of our value proposition, confidence in our ability to successfully integrate our business and our unprecedented opportunity to make the use of medicine safer and more affordable, which is exactly what our plan sponsors need now.”
“We're really excited about where we sit. We believe that as pharmaceutical manufacturers have continued to raise prices, as clients continue to look for opportunities, what's really been fun, I think, over the last 14, 15 years that I've been here is to watch the clients as they've grown, and they've had a better understanding of value that comes through the PBM. And our tools have only gotten sharper and better, and the clients have become more receptive. And we're excited about the position we sit in. We're excited about our future.”
You think this guy is excited? What a spaz! I’m the one who should be excited with all of the money I’m going to make investing in this stock.
I am HUGE!
$$$MR. MARKET$$$
). As you can tell by my earlier comments after the dump, I really was hoping you'd pick ASPS but you have done another stellar job of research!
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