Baird Downgrades Express Scripts On Industry Instability

Regulatory uncertainty is rising too high for Baird Equity Research to remain bullish on Express Scripts Holding Co (NASDAQ: ESRX).

The Rating

Analyst Eric Coldwell downgraded Express Scripts to Neutral with an $81 price target.

The Thesis

Previously, Express Scripts’ improving new business trends, its consistency in core profit and loss statements and a better sentiment for pharmacy benefits managers (PBMs) made for an attractive near-term risk-reward profile.

Now, however, Coldwell considers upside dependent on a successful sale to CIGNA Corporation (NYSE: CI). The deal is seen to have favorable odds, but the risk of downside has “significantly increased.”

“PBMs have been under heavy political attack in recent weeks and the stand-alone trajectory is almost impossible to model right now,” Coldwell wrote in a note.

The risk is primarily in recent advancement of plans for rebate-model reform.

“[It] could be material to ESRX profit model and makes long-term stand-alone modeling almost impossible right now,” Coldwell wrote.

Price Action

At time of publication, shares were trading up marginally around $77.

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