Solid Revenue Growth for Medco Health

Pharmacy benefits manager Medco Health Solutions (MHS 58.74, +1.16) reported better-than-expected third quarter earnings and strong revenue gains and issued in-line guidance for 2009 and 2010, news that sent shares of MHS about 2% higher in the first hour of Tuesday's trading.

Medco reported third quarter earnings of $0.75 per share, excluding nonrecurring items, $0.03 better than the First Call consensus of $0.72.  EBITDA reached a record $719.3 million, an increase of 16.7% year-over-year.

Revenues rose 17.8% year-over-year to $14.79 billion; the consensus expected $14.68 billion.  Medco said the gain reflected contributions from significant new client wins, as well as price inflation on name-brand drugs, partially offset by higher volumes of lower-priced generic drugs.

Total prescription volume increased 14.1% from the same period last year.

Medco issued in-line guidance for 2009, saying it sees earnings of $2.80 to $2.82 per share, excluding nonrecurring items; the consensus expects $2.80.

The company also issued guidance for 2010, saying it sees earnings of $3.28 to $3.38 per share; the consensus currently stands at $3.28.  The outlook for 2010 translates to 16-21% growth over the revised 2009 guidance.

Shares of MHS are more than 40% higher year-to-date.