CVS Caremark Corp. (CVS) reported strong second-quarter results with earnings of $0.65 per share, a penny above the Zacks Consensus Estimate and up 8.3% year over year.
Net revenue increased 17.6% year over year to $24.9 billion. Same-store sales grew 6.1% as pharmacy same-store sales rose 7.5% (negatively impacted by 478 basis points due to recent generic introductions), and front-end (general merchandise) same-store sales increased 3.0%.
Revenue in the Pharmacy Services segment grew 22.1% to $13.0 billion and retail pharmacy revenue climbed 17.2% to 13.8 billion. The top line also benefited from the conversion of RxAmerica accounting pattern, a shift in Easter holiday and a positive impact of 85 basis points as product cost rose due to a hike in federal cigarette excise tax.
Net interest expense in the quarter increased 11.5% to $142.1 million, primarily due to the higher debt attributable to the Longs Drug acquisition. The company opened 51 new retail pharmacy stores during the period, closed 14 retail pharmacy stores, and relocated 26 new retail stores.
Despite industry wide pricing pressure in the pharmacy business, results over the past several quarters have demonstrated strong sales trends with comparable same-store sales (comps) growing at solid rates. Comps increased 4.5% in 2008 and 5.3% in 2007. The company is benefiting principally from increased generic prescriptions.
Therefore, management remains optimistic about domestic demographic trends, which are expected to drive utilization rates for years to come as the population ages. The company’s mail order service is also gaining popularity and will provide additional top-line opportunities.
Management raised its guidance for the remainder of 2009, based on the strong performance during the first half of the year. Annual earnings are now expected to be in the range of $2.59 to $2.64 per share. Previous guidance was in the range of $2.55 to $2.63 per share.
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