Skip to main content

Market Overview

Express Scripts Outlook Improves Amid Tax Reform, CVS-Aetna Deal

Share:
Express Scripts Outlook Improves Amid Tax Reform, CVS-Aetna Deal

Recent developments in the healthcare space, including the proposed merger between CVS Health Corp (NYSE: CVS) and Aetna Inc (NYSE: AET), bodes well for Express Scripts Holding Company (NASDAQ: ESRX).

The Analyst

Bernstein's Lance Wilkes upgraded Express Scripts from Underperform to Market Perform with a price target boosted from $51 to $65.

The Thesis

The most compelling factor supporting an upgrade of Express Scripts' stock is tax reform, Wilkes said in a Wednesday note. Tax reform and the potential for a reduction in corporate tax rate would boost Express Scripts' after-tax earnings by around 11 percent over time, but with a near-term higher saving of about 23 percent, the analyst said. 

Second, the CVS/Aetna merger would benefit Express Scripts as health plan clients will look to "move away from a perceived competitor," the analyst said. This would impact medium-sized health plans for the most part — a segment in which Express Scripts is smaller than CVS, Wilkes said. While this segment is lower margin than the company's employment segment, it would nevertheless be additive to earnings at the expense of margins, the analyst said.

Finally, Amazon.com, Inc. (NASDAQ: AMZN)'s potential entry into the pharmaceutical space would likely prompt a large player like Walgreens Boots Alliance Inc (NASDAQ: WBA) to acquire Express Scripts in a defensive move, Wilkes said. Although there is a low probability of this occurring, it nevertheless serves as an upside opportunity for the stock, the analyst said. 

Price Action

Shares of Express Scripts gained more than 0.5 percent early Wednesday morning.

Related Links:

Analyst: Fintech Is A Big Winner From Tax Reform, 5 Stocks To Play

Baird: The Potential Restaurant Winners From A New Tax Bill

Photo courtesy of Express Scripts.

 

Latest Ratings for ESRX

DateFirmActionFromTo
Nov 2018Leerink SwannMaintainsMarket PerformMarket Perform
Nov 2018BarclaysMaintainsEqual-WeightEqual-Weight
Sep 2018Credit SuisseDowngradesOutperformNeutral

View More Analyst Ratings for ESRX

View the Latest Analyst Ratings

 

Related Articles (ESRX)

View Comments and Join the Discussion!

Posted-In: Amazon Pharmacy Bernstein healthcare Lance WilkesAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga

Latest Ratings

StockFirmActionPT
SEDGB of A SecuritiesMaintains411.0
PTLOPiper SandlerMaintains28.0
AOUTLake StreetMaintains26.0
RAPTPiper SandlerMaintains52.0
OCXLake StreetMaintains6.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
SPAC
Everything you need to know about the latest SPAC news.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com