WOONSOCKET – CVS/Caremark Corp. (NYSE: CVS) today said its first-quarter profit rose to $408.9 million or 43 cents per diluted share, an increase of 24.1 percent from the first quarter of 2006, on net revenue of $13.2 billion, an increase of 32.1 percent.
Because CVS Corp.’s $27.2 billion acquisition of pharmacy benefits manager Caremark Rx Inc. closed on March 22, the results include 10 days of Caremark operations.
Excluding merger-related expenses of $25.3 million or 1 cent per share and the roughly 2 cents per share impact of the 703.5 million shares issued in connection with the merger, the company said it would have earned 46 cents per diluted share – the earnings prediction of analysts surveyed by Bloomberg News.
In retail portion of the company, same-store sales increasee 7.5 percent compared with the year-ago quarter. Pharmacy same-store sales rose 7.8 percent while non-pharmacy sales rose 6.6 percent.
“The underlying performance in our retail business was driven by healthy sales growth in the pharmacy and front end of our stores, solid expense control and continued improvements in margin,” said CVS/Caremark President and CEO Thomas M. Ryan. “The increasing usage of generic drugs and our successful front end strategies are both driving higher margins at CVS. … Caremark’s results for the full quarter were also extremely solid. Its generic dispensing rate increased 450 basis points to a record 58.2 percent, driving margin improvements. … Both mail and retail revenues increased in the quarter, with specialty revenues climbing a very healthy 29 percent.”
In the first quarter, CVS/Caremark opened 21 new stores, relocated 51 stores and closed 15. As of March 31, it operated a total of 6,208 retail and specialty pharmacy stores and 52 specialty pharmacies in 44 states and the District of Columbia. Walgreen Co., the nation’s top drugstore chain based on sales, has nearly 5,700 stores.
The company’s MinuteClinic retail-based health care division now has 180 locations and plans to open another 300 this year.
The company was aided by rising demand for generic versions of drugs such as cholesterol medicine Zocor, which are more profitable for the chain because they are cheaper to buy than brand-name drugs, Bloomberg said.
“It’s a good quarter,” Matthew Kaufler, who helps manage $2.7 billion including CVS shares at Clover Capital Management in Rochester, N.Y., told Bloomberg. But, he added, “It’s really going to be a few quarters yet before we know whether the integration is truly successful.”
Second-quarter earnings will be 44 cents to 47 cents a share, and full-year earnings will be $1.86 to $1.91 a share, David Rickard, chief financial officer of CVS/Caremark, said in a conference call this morning. A share repurchase probably will be considered when the board meets tomorrow, he said.
Shares of CVS rose 10 cents to $36.22 at 9:12 a.m. in trading before the regular open of the New York Stock Exchange. They have climbed 17 percent over the past 12 months, Bloomberg said, while Walgreen shares have advanced 7.4 percent in the past year.
CVS/Caremark Corp. (NYSE: CVS) operates 6,200 CVS/pharmacy stores; the CVS.com online pharmacy, the pharmacy benefit management, mail order and specialty pharmacy division, Caremark Pharmacy Services; and a retail-based health care subsidiary, MinuteClinic. Additional information is available at investor.cvs.com.
