CVS Caremark’s (CVS) first quarter adjusted earnings from continuing operations came in at 60 cents per share, a couple of cents above the Zacks Consensus Estimate and higher than 55 cents reported in the year-ago period. Revenues increased 1.7% year-over-year to $23.8 billion, primarily due to robust growth of both segments — Pharmacy Services and Retail Pharmacy.

The Pharmacy Services segment recorded a 2.6% growth in revenues to $11.8 billion. Revenue growth would have been higher at 7.7% but for recent generic introductions.

Retail network claims processed during the quarter decreased 10.3% year-over-year to 132 million due to the termination of a few large contracts (effective beginning of 2010). Additionally, the decline in coverage under the Medicare Part D program brought down the number of claims. Mail choice claims processed also declined 4.8% to 15.5 million.

The performance of the retail pharmacy business is quite commendable. Revenues increased 3.6% to $14 billion in the first quarter of 2010. 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 growing at solid rates.

During the reported quarter, total same-store sales increased 2.3% over the prior-year period. While pharmacy same-store sales rose 3.7%, front-end same-store sales declined 0.7%.

Pharmacy same-store sales were negatively impacted by 290 basis points due to recent generic introductions, whereas the Maintenance Choice program had a positive impact of 260 basis points. The generic dispensing rate increased both in the Pharmacy Services and Retail segments by 270 basis points to 70.4% and 290 basis points to 72.1%, respectively.

Based on a strong first quarter, CVS raised the lower-end of its 2010 adjusted EPS guidance to $2.77-$2.84 from the previous range of $2.74-$2.84.

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