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Pharmacy benefits manager Express Scripts (ESRX), which I first wrote about on June 9, 2009 at a price of $63.64, remains a company and stock with promise. Here's why: An aging populace, plus a likely renewed emphasis on health and wellness in the United States, and the possibility of federal health care reform legislation bodes well for many health care players, including pharmacy benefits managers like ESRX.
Also, Express reported Q4 2009 EPS of 97 cents, well above the 90-cent First Call Q4 2009 consensus estimate. Further, Q4 2009 revenue rocketed higher to $8.2 billion from $5.5 billion in Q4 2008, boosted by the the super-smart acquisition of NextRx. A renewed U.S. Department of Defense contract, other new business wins, and economies of scale add to the positive story.
The First Call FY2010/FY2011 EPS estimates for ESRX are $4.90 to $6.21. Each EPS estimate looks low, according to my analysis.
Technically, Express Scripts' stock chart is strong -- an uptrend, and one where the price remains above the key, 50-day moving average -- a sign that institutional investors are establishing/adding to positions. Further, ESRX gapped-up at/near $90 -- the gap will provide additional support -- and it now trades near $99. Normally, with the stock overbought and nearing key, psychological resistance at $100, the stance would be to wait for a pull-back, but in the case of ESRX, that may be too late -- the stock may be at $110 before you know it -- so the stance is to take advantage of the uptrend now.
2010 Outlook: I view Express as a long-term play, but if investors are looking to sell ESRX within the year, it's probably best to take your profits after it rises to $108-109, if it fails to rise above $110.
Stock Analysis: I consider Express Scripts to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 25% position in ESRX now; then buy another 25% in one month, if U.S. economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 75% of my ESRX position before April 2010 and I'd put a sell/stop loss at: $64.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
The First Call FY2010/FY2011 EPS estimates for ESRX are $4.90 to $6.21. Each EPS estimate looks low, according to my analysis.
Technically, Express Scripts' stock chart is strong -- an uptrend, and one where the price remains above the key, 50-day moving average -- a sign that institutional investors are establishing/adding to positions. Further, ESRX gapped-up at/near $90 -- the gap will provide additional support -- and it now trades near $99. Normally, with the stock overbought and nearing key, psychological resistance at $100, the stance would be to wait for a pull-back, but in the case of ESRX, that may be too late -- the stock may be at $110 before you know it -- so the stance is to take advantage of the uptrend now.
2010 Outlook: I view Express as a long-term play, but if investors are looking to sell ESRX within the year, it's probably best to take your profits after it rises to $108-109, if it fails to rise above $110.
Stock Analysis: I consider Express Scripts to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 25% position in ESRX now; then buy another 25% in one month, if U.S. economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 75% of my ESRX position before April 2010 and I'd put a sell/stop loss at: $64.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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