CVS Caremark Upped to Buy - Analyst Blog
April 17 2014 - 6:55PM
Zacks
On Apr 16, Zacks Investment Research upgraded CVS
Caremark Corporation (CVS) to a Zacks Rank #2 (Buy) from a
Zacks Rank #3 (Hold).
Why the Upgrade?
The long-term expected earnings growth rate for this Rhode
Island-based integrated pharmacy service provider is 13.4%.
Moreover, CVS has delivered positive earnings surprises in all of
the last 4 quarters with an average beat of 3.5%.
CVS reported its fourth-quarter and full-year 2013 results on Feb
11, 2014. Adjusted earnings per share came in at $1.12, beating the
Zacks Consensus Estimate of $1.11 by 0.90% and exceeding the
prior-year earnings by 15.8%.
Earnings were primarily aided by healthy top-line growth of 4.6% in
the reported quarter, which was largely driven by a combined force
of 5.2% year-over-year increase in net revenues from the Pharmacy
Services segment and 5.6% rise in net revenues from the Retail
Pharmacy segment.
With respect to segment performance, net revenues from CVS's
Pharmacy Services segment increased 5.2% to $19.6 billion in the
fourth quarter, principally driven by drug cost inflation, new
products and new clients in the specialty pharmacy business.
On the other hand, same-store sales increased 4.0% over the
prior-year quarter, with a 6.8% rise in pharmacy same-store sales.
This contributed to the 5.6% rise in net revenues at the Retail
Pharmacy segment to $17.2 billion.
Based on its strong performance, CVS raised its first-quarter 2014
adjusted earnings guidance to the range of $1.03–$1.06 per share.
This new guidance is higher than the previous estimation by 7 cents
and thereby, equates to adjusted EPS growth of 24.25% to
28.25%.
CVS also expects its consolidated revenues to increase 4.25% to
5.5% in the first quarter. Moreover, the company has raised its
free cash flow guidance to the band of $5.5–$5.8 billion from
$5.1–$5.4 billion guided earlier.
The Zacks Consensus Estimate for earnings for 2014 remained flat at
$4.47 per with no downward revision over the last 30 days. For
2015, however, one estimate was revised upward over the same time
frame, raising the Zacks Consensus Estimate by 0.2% to $5.02 per
share.
Other Stocks to Consider
In the broader drug retail/wholesale space, Rite Aid
Corp. (RAD), Spartan Stores Inc. (SPTN)
and Herbalife Ltd. (HLF) are performing well.
While Rite Aid and Spartan Stores hold a Zacks Rank #1 (Strong
Buy), Herbalife retains a Zacks Rank #2 (Buy).
CVS CAREMARK CP (CVS): Free Stock Analysis Report
HERBALIFE LTD (HLF): Free Stock Analysis Report
RITE AID CORP (RAD): Free Stock Analysis Report
SPARTAN STORES (SPTN): Free Stock Analysis Report
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