Why Express Scripts' Shares Got Slammed
Nov 6th 2012 2:01PM
Updated Nov 6th 2012 2:04PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Prescription-drug benefits processor Express Scripts (NAS: ESRX) should have taken a sick day today, as its shares lost as much as 18% before settling into a 12% loss as of this writing.
So what: Although Express Scripts beat earnings estimates by $0.03 per share, its revenue came in under projections by $500 million. This wasn't the cause of the drop, as Express Scripts analysts had some uncertainty as they adjusted to the company's acquisition of rival drug-benefits company Medco Health Solutions. The big news was CEO George Paz claiming that forward expectations for next year might be too optimistic, in light of economic uncertainty heading into 2013.
The pessimistic prediction helped drag down CVS Caremark (NYS: CVS) , one of its most important partners. CVS had a strong report today as well, beating estimates on top and bottom lines and boosting its full-year forecast, but its shares were essentially flat this afternoon.
Now what: Investors never want to hear that their expectations for their stocks are too high, but this sounds like an indicator of broad economic weakness, rather than simply a problem with Express Scripts alone. However, Express Scripts' P/E is still a bit far from bargain territory, and with the company delaying full-year projections for 2013 to next February, it seems that the best thing for potential investors to do is be patient and dig deeper.
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The article Why Express Scripts' Shares Got Slammed originally appeared on Fool.com.Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more news and insights. Motley Fool newsletter services have recommended buying shares of Express Scripts Holding. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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