WOONSOCKET – CVS Caremark Corp. (NYSE: CVS) today posted a 6.7-percent increase in third-quarter profit, to $736.0 million from the year-ago $689.5 million, on net revenue that climbed 1.9 percent to $20.9 billion boosted by growth in pharmacy and front-end retail sales.
Earnings per diluted common share amounted to 50 cents, compared with the 2007 third quarter’s 45 cents (READ MORE) and the 2008 second quarter’s 53 cents per share, the company said. Excluding $98.2 million in amortization expenses, mostly related to the company’s acquisitions, earnings per diluted share amounted to 60 cents, matching the average forecast from a Bloomberg News survey of 16 analysts.
Revenue and earnings per share both set third-quarter records, CVS noted, although they lagged the company’s second-quarter levels of $21.14 billion and 53 cents per diluted share, respectively. (READ MORE)
The retail segment’s operating profit rose 31.1 percent to $808.2 million, or 7 percent of net revenue – from the year-ago period’s $616.4 million, or 5.6 percent – on revenue that rose 5.3 percent to $11.5 billion. Sales at CVS/pharmacy stores open at least one year rose 5.7 percent compared with the 2007 third quarter. Pharmacy same-store sales rose 3.8 percent year-over-year, despite recent generic drug introductions that pared results by about 280 basis points, while front-end same-store sales rose 3.3 percent, CVS said.
The pharmacy-services segment’s operating profit edged up 0.5 percent to $658.0 million, or 6.3 percent of net revenue – from the year-ago period’s $654.7 million, or 6.1 percent – on revenue that dipped 0.9 percent to $10.7 billion.
“I’m pleased to report strong third-quarter results, which were right in line with our expectations, despite the uncertain economic environment,” said Thomas M. Ryan, CVS Caremark’s chairman, president and CEO, adding: “I’m also pleased to report that we expect to close the acquisition of Longs Drug Stores today, having successfully completed the tender offer.”
About 28.32 million Longs shares – or 78.07 percent of shares in the Creek, Calif.-based drugstore and pharmacy benefits management (PBM) chain – were tendered in the two rounds of the offer, CVS said last night. After the merger, outstanding shares in Longs Drug Stores Corp. (NYSE: LDG) will cease trading on the New York Stock Exchange. Each Longs share will be converted into the right to receive the same $71.50 in cash or CVS stock as in the tender offer, and Longs Drug will become an indirect wholly-owned subsidiary of CVS, the company added.
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The acquisition, announced Aug. 13 (READ MORE), includes the 521 Longs retail drugstores in Arizona, California, Hawaii and Nevada; an RxAmerica LLC subsidiary that offers pharmacy benefit management (PBM) services to more than 8 million members and prescription-drug plan benefits to about 450,000 Medicare beneficiaries; plus the real estate associated with about 200 stores, three distribution centers and three offices.
“The Longs transaction provides significant upside for both our retail and PBM businesses over time,” Ryan said today. Analysts largely agree. “I think there’s a lot of opportunity to cut costs [at Longs],” Meredith Adler, a New York-based analyst at Barclays Capital Inc., who rates CVS shares a “buy,” told Bloomberg News last week.
Other recent highlights for CVS Caremark include:
• The Oct. 14 recommendation, by Providence Mayor David N. Cicilline, that the city CVS Caremark its new pharmacy-services provider, awarding the company a three-year, $76.7 million contract. (READ MORE)
• The Sept. 17 opening of the Bay State’s first walk-in MinuteClinic, in a CVS /pharmacy store in Medway, Mass. (READ MORE)
• And the July 17 announcement that CVS intends to expand its headquarters at Highland Corporate Park, on the Woonsocket-Cumberland line, adding two new buildings and more than 200 jobs. (READ MORE)
During the fiscal quarter ended Sept. 27, CVS Caremark opened 46 new retail pharmacies; relocated 30 and closed seven. That left the company with 6,347 regular pharmacies, 57 specialty pharmacy stores, 20 specialty mail-order pharmacies and seven regular mail-order pharmacies – in 44 states, the District of Columbia and Puerto Rico– at the quarter’s end.
CVS Caremark Corp. (NYSE: CVS) – the nation’s largest provider of prescription medications – operates the CVS/pharmacy stores; the CVS.com online pharmacy; Caremark Pharmacy Services; and the MinuteClinic retail-based health care subsidiary. Additional information is available at investor.cvs.com.
