On May 29, 2014, we issued an updated research report on
CVS Caremark Corporation
). The company recently reported a mixed first-quarter 2014 with
earnings per share lagging the Zacks Consensus Estimate and
revenues coming in higher than expected.
After several quarters of solid progress, CVS Caremark
disappointed with its earnings figure of $1.02 which although 22.9%
higher on a year-over-year basis, missed the Zacks Consensus
Estimate by 3 cents as well as the company-provided guidance range
of $1.03 to $1.06 per share.
Per management, earnings failed to meet the guidance because of
severe unforeseen weather-related issues that the company
experienced through the reported quarter. We are however encouraged
with CVS' net revenue that improved 6.3% year over year to $32.69
billion, closely beating the Zacks Consensus Estimate of $32.54
The company continues to benefit from a strong selling season,
favorable industry dynamics and increasing shareholder value. The
generic wave in the pharmaceutical industry continues to improve
profitability for CVS.
CVS Caremark witnessed robust double-digit growth in PBM
(Pharmacy Benefit Manager) on the back of a strong selling season.
Considering delay in the transition of some business loss incurred
through acquisitions, from 2014 to 2015, client net new business
was $3.0 billion in the quarter with the company progressing well
with its second half of 2014 client win. The company is also
optimistic about its 2015 selling season. Earlier the company had
stated that its retail, mail and specialty PBM services to the
Federal Employee Health Benefit Program are up for renewal in
However, the company is facing higher costs associated with its
Medicare Part D business that might hamper operating profit within
the PBM franchise. The somber macroeconomic condition also adds to
The stock currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Some better-ranked stocks in the broader healthcare industry
Edwards Lifesciences Corp.
Natus Medical Inc.
). All the three stocks carry a Zacks Rank #2 (Buy).
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