CVS posted a decent second-quarter 2014 with 16.5% year over year
rise in adjusted EPS to $1.13 which also surpassed the Zacks
Consensus Estimate by $0.03 as well as the company-provided
guidance range of $1.08 to $1.11. Net revenue on the other hand,
increased 10.7% to $34.6 billion, edging past the Zacks Consensus
Estimate of $33.41 billion. The generic wave in the pharmaceutical
industry continues to work in CVS' favor, as seen in the consistent
margin expansion of the company. We are also impressed with CVS'
strong guidance for 2014 where increased adjusted EPS reflects
strong year-over-year growth and the company's optimism about the
future. On the contrary, the decline in front-end sales was
disappointing. Moreover, the competitive landscape remains tough.
We also keep an eye on the tussle for market share gain in the PBM
as well as retail pharmacy segment. Thus, we reiterate our Neutral
recommendation on the stock.
Headquartered in Woonsocket, RI, CVS Caremark Corporation (CVS)
is the largest provider of prescription and related health care
services in the U.S. The company, one of the largest domestic
integrated pharmacy service providers, operates through three
business segments: Pharmacy Services, Retail Pharmacy and Corporate
The company's Pharmacy Services business provides a full range
of prescription benefit management (PBM) services including
Medicare Part D Services, mail order pharmacy services, specialty
pharmacy services, plan design and administration, formulary
management and claims processing. The specialty pharmacies
(including mail order and retail specialty pharmacy) support
individuals who require complex and expensive drug therapies.
Moreover, CVS has implemented steps to make prescription drugs more
affordable to consumers. Some of these programs are: Maintenance
Choice and Pharmacy Advisor. Maintenance Choice is a flexible
fulfillment option that gives patients the choice of picking up
their 90-day supply of maintenance medications from any
CVS/pharmacy store or obtaining them through mail order. Pharmacy
Advisor is a medication adherence program for chronic conditions.
Pharmacy Advisor was made available to Medicare clients from Jan 1,
With Medicare Part D Services, CVS Caremark participates in the
administration of the drug benefit added to the Medicare program
under Part D of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Medicare Part D) through the provision
of PBM services to the company's health plan clients and other
clients that have qualified as Medicare Part D prescription drug
As of Jun 30, 2014, the Pharmacy Services Segment operated 24
retail specialty pharmacy stores, 11 specialty mail order
pharmacies, 4 mail service dispensing pharmacies and 84 branches
and 6 centers of excellence for infusion and enteral services
located in 41 states, Puerto Rico and the District of Columbia.
The Retail Pharmacy segment sells prescription drugs and general
merchandise (front store products), which include over-the-counter
(OTC) drugs, greeting cards, film and photo finishing services,
beauty and cosmetic products, and convenience food through CVS/
pharmacy and Longs Drugs retail stores as well as at CVS.com (the
company's online store). The company also operates retail health
care clinics under the name, MinuteClinic. These clinics, overseen
by nurse practitioners and physician assistants, aim to treat minor
health conditions, perform health screenings, monitor chronic
health conditions and offer routine vaccinations. They are open
seven days a week and do not require an appointment, thus
discouraging unnecessary and expensive emergency room visits.
As of Jun 30, 2014, the Retail Pharmacy Segment included 7,705
retail drugstores (of which 7,647 operated a pharmacy), 17 onsite
pharmacies, 860 retail health care clinics, and the online retail
websites, CVS.com and Onofre.com.br. The retail drugstores are
located in 43 states, the District of Columbia, Puerto Rico and
Brazil. The retail health care clinics operate under the
MinuteClinic name, and 852 are located within CVS/pharmacy
CVS Caremark Corporation (CVS): Read the Full
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