Express Scripts Holding Company (ESRX): What Happened to Doom and Gloom?

The key here isn’t that Express Scripts is now overly optimistic about the economy. It isn’t. Paz reiterated in his comments on Tuesday that there is “a tremendous amount of uncertainty” and that the company is assuming that the weak economic conditions continue.  However, he focused on Express Scripts’ ability to succeed despite economic headwinds.

One particular area of opportunity noted was with Medicaid. Express Scripts’ largest customer, WellPoint, Inc. (NYSE:WLP), should benefit from expanding Medicaid enrollment. This growth could help Express Scripts. Paz indicated that he has not yet spoken with WellPoint’s new CEO, Joseph Swedish, but looks forward to doing so.

Another potential growth area mentioned was with health insurance exchanges, or HIEs. Paz didn’t think that HIEs would necessarily be a big factor in 2013. However, he sees promise for Express Scripts in the future as individuals in these exchanges seek to lower drug costs.

Foolish take
Express Scripts’ solid quarterly results and better-than-expected guidance aren’t really surprising to me. CVS Caremark Corporation (NYSE:CVS), which operates the second-largest PBM, already reported strong quarterly results and gave a positive outlook for 2013. Although a significant portion of the company’s business comes from its chain of pharmacies, its PBM revenue was up 17% year-over-year. That earlier announcement seemed to bode well for Express Scripts — and it ultimately did.

The PBM industry as whole stands to benefit from continued focus on controlling prescription drug costs. Changes in the health-care landscape such as HIEs actually highlight the value of PBMs. I think that with its operational scale and research into ways to hold down costs, Express Scripts is best-positioned to prosper. Where’s the doom and gloom? I don’t see any with this stock.

The article What Happened to Doom and Gloom? originally appeared on Fool.com and is written by Keith Speights.

Fool contributor Keith Speights has no position in any stocks mentioned. The Motley Fool recommends Express Scripts, UnitedHealth Group, and WellPoint. The Motley Fool owns shares of Express Scripts and WellPoint.

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