Express Scripts Holding Co (ESRX.O) projected full-year profit that could fall short of Wall Street's target, in its first forecast since closing a $29 billion purchase of Medco Health Solutions last month.
The U.S. pharmacy benefit manager also reported first-quarter profit below analysts' expectations on Thursday, as it spent more ahead of its massive integration of Medco.
Shares fell 0.8 percent to $53.90 in after-hours trading after Express provided its full year forecast.
The company forecast 2012 earnings in a range of $3.36 to $3.66 per share, excluding items. Analysts, on average, have been looking for $3.63, according to Thomson Reuters I/B/E/S.
The company did not provide details on the outlook, but analysts said it has a history issuing conservative forecasts early in the year only to raise them later. Express Scripts is expected to shed more light on the rationale for its forecast and its integration progress on a conference call with analysts on Friday morning.
"I'm a little surprised at where the low end of the guidance was," said Jefferies & Co analyst Arthur Henderson. "I think they're being conservative."
Express Scripts won U.S. antitrust clearance to buy rival Medco after a contentious eight-month review, creating the clear leader in management of prescriptions for Americans.
Pharmacy benefits managers, or PBMs, administer drug benefits for employers and health plans and run large mail order pharmacies.
Express Scripts expects to process about 1.4 billion prescription claims this year. The company also forecast a 2012 tax rate of 39 percent, which Gabelli & Co analyst Jeff Jonas deemed conservative.
Express also reiterated that it expected $1 billion in cost savings once Medco was fully integrated.
"They've integrated all their past deals really well and exceeded their goals," Jonas said. "There's really no reason to expect otherwise here."
Express said that first-quarter net income fell to $267.8 million, or 55 cents per share, from $326.5 million or 61 cents per share a year ago. That did not include any Medco business as that deal closed in the second quarter.
Excluding items, such as Medco acquisition costs and intangible assets related to a previous acquisition, earnings per share were 73 cents compared with analysts' expectations, on average, for 77 cents.
Revenue rose about 9 percent to $12.13 billion, exceeding Wall Street estimates by about $650 million. Claims rose 3.6 percent to 192.8 million.
"Express had good revenue and good claims volume, which certainly bodes well for the rest of the year," Jonas said.
Selling, general and administrative costs rose 38.5 percent to $267.5 million.
The company's percentage of prescriptions filled with generic drugs rose to 76.5 percent from 73.8 percent. Generic prescriptions are particularly profitable for PBMs when they are delivered by mail, as the companies use their size to leverage large discounts on price.
The financial results also marked the first quarter since Walgreen Co WAG.N, the largest U.S. drugstore chain, stopped filling prescriptions for Express Scripts patients at the end of 2011 after the companies were unable to agree on a new contract.
(Reporting by Lewis Krauskopf and Bill Berkrot in New York; Editing by Gary Hill, Matthew Lewis and Carol Bishopric)