CVS Caremark Corporation (CVS): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
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.

Overview:

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 Segment.

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, 2013.

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 plans (PDP).

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 stores.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: CVS , PBM , PDP

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