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Hanging on a Bid

Short-term, this holding's good quarter is likely to matter less to its stock than a deal.
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I want to give you my take on Express Scripts' (ESRX) just-announced (and good-looking) fourth- quarter earnings. But I'm not taking any action on those earnings in this Alert.

For the fourth quarter, the company reported net income of $1.02 a share vs. the 97-cent analyst estimate. Revenue was slightly lower than expected, coming in at $4.53 billion vs. analysts' $4.59 billion estimate. Looking forward, Express Scripts raised its 2007 guidance, predicting it'll earn $4.08 to $4.20 this year vs. the $3.94 analyst consensus estimate for 2007.

ES also announced it will expand its current stock repurchase program to up to $1 billion, about 10% of the outstanding shares, if it doesn't succeed in acquiring Caremark CMX.

The company is hosting its conference call at 9 a.m. EST; so I'll report back on anything important that comes up in the call. The numbers look great at first glance, but the short-term direction of this stock is likely to be determined by the outcome of the Caremark situation.

There's a rumor circulating that CVS (CVS) is planning to raise its bid. With Caremark's shareholder vote on the deal less than two weeks away, I think a CVS raise would make it the clear leader. If the deal doesn't go through, we've got that great buyback to look forward to, so I really won't be disappointed if it doesn't happen.

The only thing I really don't want to see is a bidding war. I don't want Express Scripts to end up overextending itself in order to acquire its larger rival.

Regards,

James J. Cramer

DISCLOSURE: At the time of publication, Cramer was long Express Scripts.

Send email to james.cramer@thestreet.com.