On Mar 13, 2013, shares of
) touched a new 52-week high of $52.93. The closing price of this
integrated pharmacy service provider was $52.90, which
represented a decent year-to-date return of 9.9%.
With a history of posting either in line or higher quarterly
earnings, the stock presently carries a Zacks Rank #2 (Buy) and
offers an attractive investment opportunity going forward.
The company's bright prospects for 2013 on the heels of solid
earnings forecast, stronger balance sheet, favorable selling
season and positive industry dynamics are driving the stock.
CVS envisages adjusted earnings per share of $3.86 − $4.00 for
2013. The Zacks Consensus Estimate of $3.94 (reflecting a
year-over-year growth of 14.45%) lies within the guidance range.
The company anticipates 2013 free cash flow and cash flow from
operations to be in the range of $4.8 - $5.1 billion and $6.4 -
$6.6 billion, respectively. The guidance includes the completion
of the accelerated share repurchase agreement worth $4 billion.
Strong cash flow enabled CVS to consistently return value to
shareholders. Management plans to achieve a payout ratio of 25%
by the end of 2013 (earlier target was 2015). Given this
backdrop, the stock should appeal to income investors.
At the same time, CVS is highly optimistic about the 2013 selling
season and shifted spotlight to 2014 selling season. Thus far,
the company is perfectly on track to continue its growth
On the domestic front, demographic trends, healthcare reforms in
the U.S., and the generic wave in the pharmaceutical industry are
expected to catalyze growth for the company. In the light of
these trends, CVS expects accelerating adoption of its programs
such as Maintenance Choice, Pharmacy Advisor and ExtraCare
loyalty program, along with expansion of its MinuteClinics.
The estimate revision trend also reflects a bullish sentiment
towards CVS for 2013. Drug retailers
Rite Aid Corporation
), carrying a Zacks Rank #1(Strong Buy) are also expected to do
well. Another healthcare stock that warrants a look is
) that carries a Zacks Rank #2.
CARDINAL HEALTH (CAH): Free Stock Analysis
CVS CAREMARK CP (CVS): Free Stock Analysis
RITE AID CORP (RAD): Free Stock Analysis
SAFEWAY INC (SWY): Free Stock Analysis Report
To read this article on Zacks.com click here.