CVS Tops 2nd Quarter Estimates

CVSSecond-quarter profit at drugstore retailer and pharmacy benefits manager CVS Caremark Corp. (NYSE: CVS – $60.36) rose 16%. Excluding acquisition-related costs, per-share earnings rose to $0.97 from $0.81 a year earlier and a penny ahead of forecasts. Revenue was higher by 1.7% to $31.25 billion and in line with Street estimates. In the latest quarter, the Rhode Island-based company said sales in its pharmacy-services business grew 2% due to higher volume across the board in the specialty pharmacy business, offset in part by new lower-priced generic drugs. CVS processed 205.9 million pharmacy network claims, 4.1% more than a year ago, helped by new client contracts. On the retail side of the pharmacy business, prescription drug revenue rose 1.9% with same-store sales up 0.8%, while same-store sales in the front of the store declined 0.4%. For the current quarter, CVS expects adjusted per-share earnings of $1.00 to $1.03, above the $0.97 estimate of analysts, but narrowed its full-year earnings view now seeing a profit of $3.90 to $3.96, from its previous outlook of $3.89 to $4.00. CVS has increased its dividend at a 21.5% annual rate over the past five years and strong cash flow augurs well for future increases over the next few years. Despite its 38% run-up in price over the past twelve months, I believe this issue remains a solid long-term investment option for conservative investors with a promising total return potential to the end of the decade, especially when viewed on a risk-adjusted basis.

CVS

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