Should You Buy CVS Caremark Corporation (NYSE:CVS) After Stellar Performance?
Rhode Island based integrated pharmacy health care service and major PBM(Pharmacy Benefits Management) provider, CVS Caremark Corporation (NYSE:CVS) reported stellar 3Q13 earnings on November 5, 2013 and also raised its forecast for the year. The U.S. No. 2 drugstore chain operator reported 5.8% growth in net revenues in 3Q13 to $32.0 billion compared to $30.22 billion during 3Q12. The revenue beat the consensus street estimate of $31.53 billion.
Pharmacy Services segment revenues grew by 7.8% to $19.5 billion in the 3Q13. The growth is largely attributed to broad based growth of claims alongside the drug cost inflation in its specialty pharmacy business. The increase was partly offset by impact of generic drug introductions in the recent times. Pharmacy network claims, due to additional claims activity associated with new clients, increased 2% in 3Q13 to 200.9 million compared to 197 million in the 3Q12.
Sales in the company’s retail business grew 3.6% at store open at least a year. The company reported earnings of $1.25 billion in the 3Q13 or $1.03 per share compared to earnings of $1 billion or $0.8 per share in 3Q12. The company reported adjusted profit at $1.05 per share after excluding gain from legal settlement and such other items. CVS’s competitor Walgreen Company (NYSE:WAG) reported earnings of $0.69 per share with revenue of approximately $18 billion for the quarter ended August 31, 2013 compared to $0.39 in the prior year quarter.
Following the stellar 3Q13 performance, CVS Caremark Corporation (NYSE:CVS) now updated its FY13 earnings guidance to $3.98 – $4.01 per share compared to prior outlook of $3.90 – $3.96 per share. The company forecasts adjusted earnings of $3.94 – $3.97 per share, excluding the gain from legal settlement. The company also expects to deliver free cash flow of $4.8 to $5.1 billion and cash flow from operations around $6.4 to $6.6 billion.