Walgreen soars as dispute ends, but rivals fall
LOS ANGELES (MarketWatch) -- Shares of
Investors bid the shares nearly 12% higher in recent action to $34.62, rallying as Walgreen (WAG) brought the feud to a halt. Express Scripts (ESRX) also climbed, adding nearly 2% to $58.76.
But the peacemaking had a detrimental effect on shares of
Rite Aid tumbled by more than 6% to $1.20, while CVS Caremark also dropped more than 6% to $45.43. The two companies had been taking Express Scripts customers away from Walgreen.
The dispute arose when Express Scripts purchased rival Medco Health Solutions for $29.1 billion, a buyout completed in April. Express Scripts imposed new reimbursement rates that Walgreen balked at, contending that it should be compensated for new services that it offered patients.
Also Thursday, shares of Laboratory Corp. of America (LH) tumbled by nearly 6% to $88.12. The medical diagnostic company reported second-quarter earnings that disappointed Wall Street analysts.
Analysts from Deutsche Bank and Standard & Poor's lowered their ratings to hold from buy on the company, citing concerns over sluggish growth and a slowdown in revenue. The company said net income was $153.3 million, or $1.56 a share, for the period ended June 30, compared with $122.9 million, or $1.20 a share, earned in the same period a year ago.
Quarterly revenue was $1.42 billion against last year's $1.4 billion. Adjusted earnings of $1.77 a share came in a penny ahead of the consensus estimate in a poll of analysts by FactSet.
Another stock on the move,
Net income was $1.34 billion, or $1.27 a share, compared with $1.27 billion, or $1.16 a share, for the same period a year ago. Quarterly sales generated by the Minnetonka, Minn.-based company reached $24.6 billion compared with last year's $22.8 billion.
Analysts polled by FactSet had expected the company to report earnings of $1.18 a share.
In morning research notes, some analysts said that the market was concerned about near-term margin pressures but that the managed-care sector remains a strong investment.
"UnitedHealth remains one of our favorite, long-term ideas in managed care as we believe the company is very well positioned for a rapidly changing marketplace across several health-care businesses," said Stifel Nicolaus analyst Thomas Carroll.
Goldman Sachs analyst Matthew Borsch said the market may be concerned about a "head fake" in which solid UnitedHealth results will be followed by sluggish results from other companies in the sector.
"As the bellwether and first to report, UnitedHealth generally sets the tone for the earnings season and we would therefore expect this solid quarter to ease investor concerns over second-quarter earnings across the group," Borsch wrote in a note to clients. "Managed care stocks should rally on this quarter."
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