CVS Caremark 4Q Net Up 3.7% On Higher Sales; Lifts Fiscal Year Outlook
February 08 2012 - 7:02AM
Dow Jones News
CVS Caremark Corp.'s (CVS) fourth-quarter profit rose 3.7% as
pharmacy services and retail revenue each grew, though results were
hurt by the increased number of generic products that are hitting
the market.
CVS raised its full-year earnings guidance by 3 cents a share,
as the company anticipates a greater-than-expected benefit from
business being driven away from rival Walgreen Co. (WAG) due to its
impasse with pharmacy-benefits manager Express Scripts Inc.
(ESRX).
The company's shares ended last year with a 17% gain, exceeding
the broader market's growth and far better than the 15% drop for
Walgreen, as investors and analysts praise the company's
integration of pharmacy-benefits manager Caremark. CVS has touted
the success of its MinuteClinic retail health-care centers and
observers are banking on the CVS benefiting from the contract
expiration between Walgreen and Express Scripts.
In the latest quarter, revenue in the company's pharmacy
services segment jumped 32%, again boosted by a contract with Aetna
Inc. (AET) as well as an acquisition of a Medicare prescription
drug business last year. On the retail side of the pharmacy
business, sales were up 4% as same-store sales climbed 2.5%.
CVS reported a profit of $1.06 billion, or 81 cents a share, up
from $1.03 billion, or 75 cents a share, a year earlier. Adjusted
earnings from continuing operations, which excludes such items as
tax benefits, rose to 89 cents a share from 79 cents.
Revenue jumped 15% to $28.32 billion.
In November, CVS predicted earnings of 87 cents to 91 cents a
share and total sales growth of 13% to 15%.
Gross margin narrowed to 19.6% from 22.2%.
The company's pharmacy same-store sales were hurt due to recent
introductions of generic drugs. While CVS and other drugstore
chains are expected to benefit from a wave of generics coming to
market, CVS has warned that the initial limited supply of Lipitor
and other drugs will keep costs high for several months. Generics
have increasingly hit the market in recent years, but 2012 will see
the greatest impact yet as more than $30 billion in drugs lose
patent protection.
CVS estimated first-quarter adjusted earnings of 61 cents to 63
cents a share, compared with analysts' forecasts of 61 cents,
according to Thomson Reuters.
For the full year, CVS now forecasts adjusted per-share earnings
from continuing operations of $3.18 to $3.28, up from the December
view of $3.15 to $3.25.
Shares closed at $43.08 on Tuesday and were inactive in
premarket trading.
-By John Kell, Dow Jones Newswires; 212-416-2480;
john.kell@dowjones.com
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