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Earnings Preview: Express Scripts reports 1Q Mon

The Associated Press

Express Scripts Holding Co. will report how 2013 is shaping up for the nation's largest pharmacy benefits manager when it announces quarterly results Monday.

WHAT TO WATCH FOR: The pharmacy benefits manager, or PBM, said in February its net income jumped almost 74 percent in last year's fourth quarter as it absorbed a major acquisition and benefited from increased generic drug use. Both factors also should influence the first quarter of 2013.

The St. Louis company completed its $29.1 billion acquisition of competitor Medco Health Solutions in April 2012, and Express Scripts revenue and prescription counts have since swelled. Express Scripts said in February its fourth-quarter revenue more than doubled compared to the previous year's quarter, which occurred before the deal closed.

Generic drugs have helped profitability for the past few quarters. Top-selling medicines like the cholesterol fighter Lipitor have lost U.S. patent protection, which exposes them to cheaper generic competition.

Generic drugs hurt pharmacy revenue because they cost less than brand-name products. But they help profitability because they provide a wider margin between the cost for the pharmacy to purchase the drugs and the reimbursement received.

Express Scripts said in February it expects adjusted earnings this year to range between $4.20 and $4.30 per share, but it also said it doesn't know yet how much it will spend integrating Medco. Analysts will be looking for updates on both items.

Express Scripts will release its results Monday afternoon and then hold a Tuesday morning conference call to discuss them.

Shares of Express Scripts climbed 21 percent last year to close 2012 at $54. The stock closed at $58 Thursday, which amounts to a 7.4 percent advance so far in 2013.

WHY IT MATTERS: The Medco deal made Express Scripts the biggest PBM by far in the country.

PBMs like Express Scripts handle prescriptions for millions of people. They run prescription drug plans for employers, insurers and other customers. They process mail-order prescriptions and handle bills for prescriptions filled at retail pharmacies. They use large purchasing power to negotiate lower drug prices and make money by reducing costs for health plan sponsors and members.

WHAT'S EXPECTED: Analysts forecast, on average, earnings of 97 cents per share on $25.45 billion in revenue for the quarter, according to FactSet.

For 2013, they expect earnings of $4.26 per share on $100.81 billion in revenue.

LAST YEAR'S QUARTER: Company earnings fell 18 percent as Express Scripts worked to close the Medco deal.

The St. Louis company earned $267.8 million, or 55 cents per share, which was down from $326.5 million, or 61 cents per share, in the previous year's quarter. Revenue climbed 9 percent to $12.13 billion.