Express Scripts , whose stock has climbed back to all-time record highs recently after recovering from its substantial losses late last year, will release its quarterly report on Monday. Yet even with share-price gains demanding similar improvement in fundamentals to justify the stock's valuation, Express Scripts earnings look poised to provide the growth investors want to see.

The pharmacy-benefits management business has gotten a lot of attention lately, as the focus on health-care reform has forced employers and insurance companies to look for ways to control costs of prescription drugs. As Obamacare begins to approach full implementation, cost controls will become even more important, and as the largest PBM in the country, Express Scripts has the best opportunity to deliver key services to its clients. Let's take an early look at what's been happening with Express Scripts over the past quarter and what we're likely to see in its quarterly report.

Stats on Express Scripts

Analyst EPS Estimate

$1.10

Change From Year-Ago EPS

25%

Revenue Estimate

$25.52 billion

Change From Year-Ago Revenue

(7.8%)

Earnings Beats in Past 4 Quarters

4


Source: Yahoo! Finance.

Can Express Scripts earnings keep growing faster?
In recent months, analysts have gotten even more optimistic about Express Scripts earnings, raising their June-quarter estimates by a nickel per share and making a similar-sized increase to full-year 2013 predictions. The stock has followed suit with a nice gain of about 20% since late April.

Much of the gains in Express Scripts stock came after the company's first-quarter report in late April, as results came in above expectations. With big gains in revenue and income coming from its acquisition of Medco Health Solutions, Express Scripts cited a rising rate of filling prescriptions with generic drugs, seeing a boost of 4 percentage points to 80.5% in the first quarter. The company also raised its expected earnings range slightly.

But one issue that Express Scripts faces is increased competition, both from other PBMs and from companies seeking to pull their pharmacy-benefits management businesses in-house. UnitedHealth , for instance, has continued its PBM services away from Express Scripts' Medco unit toward its own OptumRx business, with about 32,000 UnitedHealthcare customers representing roughly 2 million members making the transition as of April 1. With further moves scheduled for June 1 and July 1, UnitedHealth poses a major loss for Express Scripts.

Elsewhere in the PBM space, Catamaran has differentiated itself from Express Scripts by bucking the established practices in the industry, offering transparent pricing that gives clients more flexibility to pick desirable drugs rather than using pricing power to try to wring greater margins from drug sales. Desirable technology has attracted major customers to Catamaran, posing a longer-term threat to Express Scripts.

In the Express Scripts earnings report, look to see not only how well the company does compared to past results but also in comparison to PBM rival CVS Caremark . With its network of retail drug stores, CVS isn't as focused on the PBM space as Express Scripts, but its mail-order delivery business represents an important part of its revenue. Still, Express Scripts continues to have the leadership advantage in picking its strategic direction for future growth.

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The article Will Express Scripts Earnings Keep Getting Healthier? originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends UnitedHealth Group. It recommends and owns shares of Catamaran and Express Scripts. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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