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I'm Reiterating my Buy rating for Express Scripts (NASDAQ: ESRX), first recommended on June 9, 2009 at a price of $63.64, and the reason isn't the stuff of rocket science. An aging populace, plus a likely renewed emphasis on health and wellness in the United States, and the probability of federal health care reform legislation bodes well for many health care players, including pharmacy benefits managers like ESRX. If you bought the shares on June 9, you're up about 20%.
During FY2009, ESRX's revenue will likely fall about 1-2%, exclusive of results from WellPoint (NYSE: WLP), which Express Scripts agreed to acquire earlier this year, pending approvals. But, as is the norm on Wall Street, institutional investors are pyschologically already in 2010 -- looking to ESRX's much brighter days ahead. In a year, ESRX's stock should be over $100, assuming a U.S. economic recovery.
More-cautious investors may wish to wait for ESRX to pull-back to the $71-73 range, but that takes nothing away from ESRX's technically-strong stock chart. The First Call FY2009/FY2010 EPS estimates for ESRX are $3.51 to $4.56.
Stock Analysis: Express Scripts is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in ESRX now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your ESRX position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $36.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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