Express Scripts' CEO Swap: What Wall Street Thinks

Shares of Express Scripts were trading higher by 0.60 percent just before noon on Thursday following the company's announcement the day prior that its CEO George Paz will retire next May and will be replaced by Tim Wentworth, its current president.

Leerink: Wentworth ‘Well Qualified' To Lead

David Larsen of Leerink commented in a note that Paz was "invaluable" to Express Scripts' growth over the past decade and was a "key figure" in the company's acquisition of Medco Health Solutions. Nevertheless, a leadership change is a "positive" for the company, as management needs to develop new ways to evolve and meet the demands of a "more consumer-oriented" healthcare environment.

Related Link: Two Analysts Discuss Why Express Scripts Could Lose From A Humana Takeover

With that said, Larsen suggested that Wentworth is "well qualified" and "well suited" to lead the company. The executive has "deep experience" after joining Express Scripts in 2012 following its merger with Medco and currently has operational responsibilities with Express Scripts.

Finally, Larsen hypothesized that departure of Paz makes a large strategic deal "more likely" over the near term and investors should view the leadership change "favorably."

Shares remain Outperform rated with an unchanged $105 price target.

Mizuho: New CEO A ‘Potential Game Changer'

Ann Hynes of Mizuho Securities commented on the CEO transition, noting that the announcement should be viewed "positively" and result in "several positive catalysts" for the company over the next 12 to 18 months.

Hynes continued that Wentworth has "extensive" industry experience and is more likely to pursue large scale and transformative deals. The analyst suggested that Rite Aid Corporation (NYSE: RAD) is a likely acquisition target given her industry checks that suggest Express Scripts is at a competitive disadvantage to CVS without a similar integrated retail/PBM offering.

Finally, Hynes argued that while Paz did an "impressive" job growing Express Scripts, the new CEO transition will be "welcomed" by the investment community. Moreover, a new leadership could help close the valuation gap as the stock is trading at 13.7x 2016E adjusted earnings per share versus its industry peers trading in the 16x to 19x range.

Shares remain Buy rated with an unchanged $101 price target.

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