Drugstore chain CVS Caremark Corp. (CVS) on Wednesday reported a 7 percent increase in profit for the fourth quarter, reflecting higher revenues at both its retail pharmacy and pharmacy services segments.
Adjusted earnings per share as well as revenues for the quarter topped analysts' expectations. Looking ahead, CVS raised its fiscal 2013 earnings outlook to reflect the impact of debt refinancing.
Larry Merlo, president and chief executive officer of CVS Caremark, said, "I'm very pleased with our fourth quarter results. Both the PBM and retail segments turned in strong performances at the high end of our expectations. And we also realized below-the-line benefits in the quarter from a lower effective tax rate and fewer shares than we originally anticipated, resulting in EPS exceeding the high end of our guidance by approximately three cents per share."
Revenues in the retail pharmacy segment for the fourth quarter increased 5 percent from the year-ago quarter to $16.28 billion, while same store sales rose 4.0 percent.
Pharmacy same-store sales also rose 4 percent, positively impacted by calendar day shifts and a 9 percent increase in pharmacy same store prescription volumes. However, pharmacy same store sales were negatively impacted by about 11 percentage points due to recent generic introductions. Front store same store sales increased 3.9 percent.
Pharmacy services segment revenues grew 17 percent from the prior-year quarter to $18.64 billion. The increase was primarily driven by new 2012 client starts, drug cost inflation, and growth of the company's Medicare Part D program.
Pharmacy network claims processed during the quarter rose 7 percent to 205.5 million, reflecting new 2012 client starts as well as higher claims activity associated with the Medicare Part D program.
CVS Caremark's fourth-quarter net earnings were $1.13 billion or $0.90 per share, up from $1.06 billion or $0.81 per share in the prior-year period. The latest quarter's results include loss on early extinguishment of debt of $348 million or $0.17 per share.
Adjusted earnings per share from continuing operations were $0.97, compared to $0.89 per share in the year-ago quarter. The adjusted earnings results include the loss on early extinguishment of debt. Excluding this, adjusted earnings per share were $1.14.
On average, 20 analysts polled by Thomson Reuters expected the company to earn $1.10 per share for the quarter. Analysts' estimates typically exclude special items.
Net revenues for the quarter grew 11 percent to $31.39 billion from $28.32 billion in the prior-year period and beat analysts' consensus estimate of $31.13 billion.
For fiscal 2012, CVS Caremark's net income rose to $3.88 billion or $3.03 per share from $3.46 billion or $2.57 per share in the previous year.
Adjusted earnings per share from continuing operations were $3.27, compared to $2.80 last year and includes loss on early extinguishment of debt. Excluding this, adjusted earnings per share were $3.43.
Net revenues grew 15 percent to $123.13 billion from $107.10 billion in the prior year.
Analysts expected the company to earn $3.40 per share for the year on revenues of $122.88 billion.
Looking ahead to the first quarter, CVS Caremark maintained its outlook for reported earnings per share from continuing operations of $0.71 to $0.74 and adjusted earnings per share from continuing operations of $0.77 to $0.80. Street expects the company to earn $0.79 per share for the year.
For fiscal 2013, CVS Caremark raised its earnings outlook to reflect the anticipated $0.02 per share of earnings per share accretion related to the debt tender and refinancing that was executed during the year-ago period. The earnings per share accretion is due to the reduction of interest expense going forward.
The company now forecasts reported earnings per share from continuing operations of $3.61 to $3.75 and adjusted earnings per share of $3.86 to $4.00.
Earlier, the company forecast reported earnings per share from continuing operations of $3.59 to $3.73 per share and adjusted earnings from continuing operations in a range of $3.84 to $3.98 per share.
Analysts expect the company to report earnings of $3.94 per share for the year.
CVS closed Tuesday's regular trading at $51.72. In Wednesday's pre-market, the stock is adding $0.78 or 1.51 percent to $52.50.
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