CVS Caremark's 3rd quarter profit jumps 16 pct. as drugstore, pharmacy services revenue rise

WOONSOCKET, R.I. – CVS Caremark Corp. said Tuesday that its third-quarter earnings climbed 16 per cent. The drugstore operator and pharmacy benefits manager posted revenue increases in both businesses, benefiting from new customers won from rivals, and raised its full-year earnings outlook.

The Woonsocket, R.I., company said it earned $1.01 billion, or 79 cents per share, in the three months that ended Sept. 30. That compares with earnings of $868 million, or 65 cents per share, in last year’s quarter. Adjusted earnings were 85 cents per share, 2 cents better than analysts expected.

Revenue jumped 13 per cent to $30.2 billion, above the $30.09 billion analysts expected.

CVS said revenue from pharmacy services climbed 22 per cent to $18.1 billion, mainly because of new client starts, growth of its Medicare Part D prescription program and higher medication prices.

Revenue from drugstores rose 5.5 per cent to $15.5 billion, as revenue at stores open at least a year rose 4.3 per cent from a year earlier.

That included a significant bump from millions of Walgreen Co. customers who migrated to CVS stores during a nearly nine-month split between Walgreen and Express Scripts Holding Co., which runs drug plans for employers, insurers and other customers as a pharmacy benefits manager, or PBM. Walgreen fills prescriptions for Express Scripts, but the two let their contract expire at the end of 2011. They resumed doing business Sept. 15.

“We posted strong results across the enterprise, with the pharmacy services segment significantly outpacing our growth expectations. The retail pharmacy business continued to capitalize on the market disruption resulting from the impasse between two of our competitors,” CVS Caremark CEO Larry Merlo said in a statement.

He said CVS now anticipates retaining at least 60 per cent of the prescriptions gained during the impasse.

CVS Caremark runs the second-largest chain of drugstores in the U.S., after Walgreen’s, with more than 7,400 pharmacies.

The company said it now expects adjusted earnings of $3.38 to $3.41, up from its previous forecast of $3.32 to $3.38 per share.

In premarket trading, sales rose $1.11, or 2.4 per cent, to $47.74.