Express Scripts had strongest 3Q among PBM stocks

All three are pharmacy benefits managers, providing drug benefit services to health plan sponsors and members.

Going into Tuesday's session, Express Scripts shares were up 6.6 percent for the three months ending Sept. 30, while Medco shares had lost 6.7 percent of their value and CVS stock had fallen 17.3 percent.

Both Medco and Express Scripts reported stronger-than-expected results in the second quarter, with increased use of mail-order prescriptions and low-cost generic drugs boosting their profits. CVS's results were equal to Wall Street expectations, as it also benefited from rising generic drug sales.

In a telephone interview, Jefferies & Co. analyst Arthur Henderson said Express Scripts was helped by low expectations.

"Their guidance was conservative, they had a very good quarter that benefited from ongoing favorable trends in generic utilization trends, that drove some upside in that quarter I think some people didn't expect to see," Henderson said, adding that the company also generated strong cash flows.

Henderson said Medco shares are trading at a significant discount compared to Express Scripts, but he thinks the sector will continue to perform well.

"PBMs are benefiting from the trends that are hurting big pharma," he said.

In afternoon trading, Express Scripts shares climbed $7.59, or 11.4 percent, to $74.18. CVS shares picked up 19 cents to $32.86, and Medco stock rose $2.43, or 5.6 percent, to $46.03.