CVS Caremark Upped to Buy
On Apr 16, Zacks Investment Research upgraded CVS Caremark Corporation (CVS) to a Zacks Rank #2 (Buy) from a Zacks Rank #3 (Hold).
Why the Upgrade?
The long-term expected earnings growth rate for this Rhode Island-based integrated pharmacy service provider is 13.4%. Moreover, CVS has delivered positive earnings surprises in all of the last 4 quarters with an average beat of 3.5%.
CVS reported its fourth-quarter and full-year 2013 results on Feb 11, 2014. Adjusted earnings per share came in at $1.12, beating the Zacks Consensus Estimate of $1.11 by 0.90% and exceeding the prior-year earnings by 15.8%.
Earnings were primarily aided by healthy top-line growth of 4.6% in the reported quarter, which was largely driven by a combined force of 5.2% year-over-year increase in net revenues from the Pharmacy Services segment and 5.6% rise in net revenues from the Retail Pharmacy segment.
With respect to segment performance, net revenues from CVS's Pharmacy Services segment increased 5.2% to $19.6 billion in the fourth quarter, principally driven by drug cost inflation, new products and new clients in the specialty pharmacy business.
On the other hand, same-store sales increased 4.0% over the prior-year quarter, with a 6.8% rise in pharmacy same-store sales. This contributed to the 5.6% rise in net revenues at the Retail Pharmacy segment to $17.2 billion.
Based on its strong performance, CVS raised its first-quarter 2014 adjusted earnings guidance to the range of $1.03–$1.06 per share. This new guidance is higher than the previous estimation by 7 cents and thereby, equates to adjusted EPS growth of 24.25% to 28.25%.
CVS also expects its consolidated revenues to increase 4.25% to 5.5% in the first quarter. Moreover, the company has raised its free cash flow guidance to the band of $5.5–$5.8 billion from $5.1–$5.4 billion guided earlier.
The Zacks Consensus Estimate for earnings for 2014 remained flat at $4.47 per with no downward revision over the last 30 days. For 2015, however, one estimate was revised upward over the same time frame, raising the Zacks Consensus Estimate by 0.2% to $5.02 per share.
Other Stocks to Consider
In the broader drug retail/wholesale space, Rite Aid Corp. (RAD), Spartan Stores Inc. (SPTN) and Herbalife Ltd. (HLF) are performing well. While Rite Aid and Spartan Stores hold a Zacks Rank #1 (Strong Buy), Herbalife retains a Zacks Rank #2 (Buy).
Read the Full Research Report on CVS
Read the Full Research Report on RAD
Read the Full Research Report on HLF
Read the Full Research Report on SPTN
Zacks Investment Research
