On Feb 26, 2013, we reiterated our long-term Neutral
) following the strong fourth-quarter 2012 results.
As reported on Feb 6, CVS' fourth-quarter 2012 earnings and
revenues beat the Zacks Consensus Estimate quite comprehensively.
Its adjusted earnings rose 28.1% year over year to $1.14, beating
the Zacks Consensus Estimate by 3.6%. Net revenue shot up
10.9% to $31.4 billion, surpassing the Zacks Consensus Estimate.
We note that the company surpassed its financial goals for 2012.
The company anticipates benefits from the debt tender offer and
refinancing initiatives. CVS has thereby raised its adjusted
earnings outlook for 2013 and currently expects adjusted earnings
in the band of $3.86-$4.00 for the ongoing year while the current
Zacks Consensus Estimate is pegged at $3.92. Analysts have
revised estimates upward following the release of the
fourth-quarter results. Given the bullish estimates, the stock
carries a Zacks Rank #2 (Buy).
CVS gained from the earlier
) impasse in 2012. While CVS met its goal of retaining 60% of the
scripts gained from Walgreens during the impasse, we are
apprehensive about the company's optimistic target of retaining
the same throughout 2013. We believe that CVS might lose momentum
on account of the resolution.
While the tussle for market share with the retail giant raises
concern, CVS also continues to lag Express Scripts in Pharmacy
Business Management (PBM). The situation is not likely to improve
in 2013. Adding to our concerns, macroeconomic conditions remain
As health care costs continue to climb despite the current
economic doldrums and severe budget pressures, the need for
innovative solutions like PBM continues to grow. However, drug
retail and PBM is a highly competitive business in the U.S.
Although CVS is set on a growth trajectory, the tough competitive
landscape warrants caution. Thus, we prefer to remain on the
Other Stocks to Consider
Apart from CVS,
) which carries a Zacks Rank #2 (Buy) warrants a look.
CARDINAL HEALTH (CAH): Free Stock Analysis
CVS CAREMARK CP (CVS): Free Stock Analysis
EXPRESS SCRIPTS (ESRX): Free Stock Analysis
WALGREEN CO (WAG): Free Stock Analysis Report
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