CVS Caremark Profit Jumps 18 Pct; Boosts Outlook
CVS Caremark Corp.’s second-quarter net income jumped 18.4 percent, as new business for its drugstore chain and an expansion of its pharmacy benefits management segment pushed revenue higher.
Its adjusted earnings topped Wall Street estimates, the company raised its forecast for 2012 and CVS shares rose more than 2 percent in premarket trading.
The Woonsocket, R.I., company said a recently settled split between rival drugstore chain Walgreen Co. and Express Scripts Holding Co. sent customers to CVS drugstores, and it aims to keep them. CEO Larry Merlo said the split added between 6.5 million and 7 million prescriptions for his pharmacies in the quarter, and it contributed about 3.5 cents per share to earnings.
Walgreen used to fill prescriptions for St. Louis-based Express Scripts, which runs drug plans for employers, insurers and other customers as the nation’s largest pharmacy benefits manager, or PBM. The companies let a contract between them expire at the end of last year, but they said last month they will resume doing business Sept. 15.
Even so, CVS Caremark still forecasts a gain of about 5 cents per share in the third and fourth quarters combined from the split. In this year’s fourth quarter, it expects to keep at least 50 percent of the business it gained since the split began. Merlo has said pharmacy customers are hard to lose and, once a drugstore loses them, hard to regain.
"We’ve had the better part of nine months now to introduce these new customers to the CVS brand," he said.
In the second quarter, CVS Caremark earned $966 million, or 75 cents per share. That’s up from $816 million, or 60 cents per share, a year ago.