Walgreen Company (WAG), Express Scripts Holding Company (ESRX): Drug Stores Set to Profit From Obamacare

Express Scripts looks to control costs

Express Scripts Holding Company (NASDAQ:ESRX) recently merged with Medco. This increase in the company’s size will allow it to put pressure on its suppliers in order to decrease the operating expenses associated with it. This could help lower the price of drugs, if competition between the drug stores for Obamacare patients heats up.

The company will further be able to control costs by encouraging members to switch to using generic drugs, which carry a higher profit margin for the drug stores. Furthermore, the company has a mail-order pharmacy, which can allow it to keep administrative costs down due to the volume increase that is expected with Obamacare.

This year, analysts expect EPS to improve 15%, and another 15% next year. However, I see greater profits next year due to the new healthcare plan. Curiously, analysts predict the company will increase revenue by 7.8% this year, and only 0.8% next year. However, there are no gaping flaws to the company’s fundamentals.

Take your pick

With Obamacare nearly at complete rollout at the beginning of next year, I don’t see there being a long period of time between when the drug stores begin to take on new patients, and when profits start rolling in. Shareholders could see substantial gains as early as next year’s first quarter. All three of these companies are set for major profits, but the firms that secure their position the earliest will be able to keep profits flowing long into the future.

The article Drug Stores Set to Profit From Obamacare originally appeared on Fool.com and is written by Phillip Woolgar.

Phillip Woolgar has no position in any stocks mentioned. The Motley Fool recommends Express Scripts. The Motley Fool owns shares of Express Scripts. Phillip is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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