CVS Profit Tops Estimates on Former Walgreen Customers
CVS Caremark Corp. (CVS), the largest provider of prescription drugs in the U.S., posted third-quarter profit that exceeded analysts’ estimates and raised its earnings forecast for the year after winning customers from Walgreen Co. (WAG)
Net income rose 16 percent to $1.01 billion, or 79 cents a share, from $868 million, or 65 cents, a year earlier, Woonsocket, Rhode Island-based CVS said today in a statement. Excluding some items, profit was 85 cents a share, topping the 84-cent average estimate of 19 analysts surveyed by Bloomberg.
CVS boosted revenue 13 percent to $30.2 billion after luring shoppers from Walgreen, which last year ended a contract to sell prescriptions to customers of employee-benefits manager Express Scripts Holding Co. (ESRX) CVS stepped up marketing and promotions to retain those customers after Walgreen and Express Scripts renewed their contract in September.
“CVS is retaining more Walgreen scripts than we originally expected,” John Heinbockel, an analyst at Guggenheim Securities in New York, wrote today in a note. He rates the shares a buy. The “retail segment results remained robust.”
CVS rose 0.5 percent to $46.88 at the close in New York. The shares have advanced 15 percent this year.
The company said today it expects to keep at least 60 percent of the prescriptions it gained from Walgreen’s dispute with Express Scripts. The company previously said it expected to keep at least 50 percent of those prescriptions in the fourth quarter.
Retail pharmacy same-store sales increased 4.3 percent, helped by a “significant” benefit from former Walgreen customers, CVS said. That equated to the retention of about 6.5 million to 7 million prescriptions formerly filled by Walgreen, Chief Executive Officer Larry Merlo told analysts today on a conference call.
“The retail pharmacy business continued to capitalize on the market disruption resulting from the impasse between two of our competitors, and our retention of the prescriptions we gained during that impasse has been strong since their dispute was resolved,” Merlo said in the statement.
Adjusted profit this year will be as much as $3.41, CVS said today. That’s higher than a previous forecast of a maximum of $3.38. Analysts estimated $3.37, on average.
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