Medco Health (MHS) Q3 Sales and Profits Grow, Issues Strong Outlook (Update)
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(Update with comments from analysts)
Medco Health Solutions, Inc. (NYSE: MHS), the largest U.S. pharmacy benefits manager, reported a third-quarter earnings per share of 75 cents, 3 cents better than the market estimate of 72 cents. Profit earned by the company rose 13.5 percent from the year-ago quarter to $335.6 million from $295.7 million.
Revenue for the company in the third quarter was $14.80 billion, ahead of the analyst estimate of $14.68 billion. Revenue took a jump from the $12.56 billion taken in in the same quarter last year.
The company is expecting a profits of $3.28 to $3.38 per share in 2010, which compares favorably to the analyst estimate of $3.28.
"Clients are drawn to the value driven by Medco's innovations, and they have expressed their strong interest and confidence in Medco by awarding us over $20 billion of new business since 2008. Of equal importance, we currently expect to retain 99 percent of our clients in 2010, a new company record," said David B. Snow Jr., Medco chairman and CEO.
Medco saw its gross margin increase to a record of $1.04 billion in the third quarter, an increase of 12.5 percent over the year-ago quarter. Total adjusted prescription volume for the company rose 14.1 percent, while Medco’s mail-order services fell by 2.3 percent on account of the drop in brand-name drugs sold.
Analyst Comments:
Deutsche Bank analysts maintained a Buy rating for Medco Health Solutions noting that the company’s sales growth was pushed by contribution from new clients and price increases on branded drugs during the third quarter. This was enough to partially offset the loss in revenue from generic drug usage.
“We consider this as yet another excellent quarter of execution for MHS, with all key metrics (GDR, EBITDA/Rx, and EPS) beating Deutsche Bank expectations,” analysts for Deutsche Bank stated. “Medco remains a best-in-class PBM with a core focus on improving clinical outcomes in addition to reducing broader healthcare costs.”
Analysts at Wells Fargo have maintained a Market Perform rating on Medco, noting that the Company’s ability to gain new business from its peers and the benefits from new generics should lead to strong earnings per share growth.; however the analysts see a limited growth potential in the over the long-term.
Medco has moved up 2.22 percent to $58.86 following the reported results.
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