Drugstore operator and pharmacy benefits manager CVS Caremark Corp. (CVS) on Thursday reported a 39% surge in profit for the third quarter compared to the same period last year, reflecting double-digit segmental revenue growth. Adjusted earnings per share from continuing operations as well as net revenues for the quarter grew from last year and beat analysts' estimates. Looking ahead, the company lifted the lower end of its adjusted earnings forecast for fiscal year 2009.
Third-Quarter Results
Net income available to the common shareholders for the third quarter rose to $1.02 billion or $0.71 per share from $732.5 million or $0.50 per share in the prior-year quarter.
The latest quarter's results include loss from discontinued operations of $1.8 million of lease-related costs, compared to loss of $82.8 million or $0.06 per share of lease-related costs in the previous-year period.
Income from continuing operations for the quarter rose to $1.02 billion or $0.71 per share from $818.8 million or $0.56 per share a year ago. The latest quarter's results include previously unrecognized tax benefits of $155.7 million, or $0.11 per share, related to the expiration of various statutes of limitation and settlements with tax authorities.
On an adjusted basis, net earnings from continuing operations available to common shareholders for the quarter increased to $1.01 billion or $0.76 per share from $877.5 million or $0.60 per share in the year-ago quarter. On average, 19 analysts polled by Thomson Reuters expected the company to report earnings of $0.64 per share. Analysts' estimates typically exclude special items.
Net revenues for the third quarter increased 18.1% to $24.64 billion from $20.86 billion in the year-ago quarter, and beat analysts' consensus revenue estimate of $24.61 billion. Net revenues for the quarter were positively impacted by one more reporting day compared to the third quarter of 2008.
Operating profit for the quarter increased to $1.57 billion from $1.47 billion in the prior-year period.
Commenting on the results, Tom Ryan, Chairman, President, and Chief Executive Officer of CVS Caremark, said, "I'm very pleased with our performance across the enterprise this quarter. The quarter was characterized by continued industry-leading performance in our retail business, solid performance in our PBM, and record results from MinuteClinic. Our integrated pharmacy care offerings are contributing to results across the company at a growing pace. We achieved solid revenue growth, healthy earnings growth and significant free cash flow."
During the quarter, CVS Caremark opened 65 new retail pharmacy stores, and closed 6 retail pharmacy stores and 1 specialty pharmacy. The company also relocated 22 retail pharmacy stores.
As of September 30, 2009, the company operated 7,008 retail pharmacy stores, 49 specialty pharmacy stores, 20 specialty mail order pharmacies and 6 mail order pharmacies in 43 states, the District of Columbia and Puerto Rico.
Peer Performance
On Tuesday, Medco Health Solutions Inc. (MHS) reported an increase in net income for the third quarter to $335.6 million or $0.69 per share from $295.7 million or $0.58 per share in the prior-year period, aided by new client wins and price inflation on brand-name drugs that led to an 18% increase in revenues. Total net revenues increased to $14.80 billion from $12.56 billion in the previous-year quarter.
In late October, Express Scripts Inc. (ESRX) reported a decline in profit for the third quarter to $197.6 million or $0.71 per share from $201.9 million or $0.81 per share in the year-ago quarter, hurt by higher expenses. Revenue improved 3% to $5.62 billion from $5.45 billion in the previous-year period.
Segmental Results
CVS Caremark's pharmacy services revenues for the quarter climbed 23.4% year-over-year to $13.03 billion. The increase in revenues was 27.2% while adjusting the growth rate for the impact of new generics. Net revenues from mail service grew 14.8% to $4.16 billion and retail network revenues rose 28.1% to $8.78 billion. During the quarter, Mail choice claims processed increased 11.4% to 16.4 million, primarily as a result of net new client starts. Pharmacy network claims processed during the quarter rose 9.0% to 146.5 million, primarily due to the addition of RxAmerica claims and new client starts.
Revenues in the retail pharmacy segment increased 17.9% from the year-ago period to $13.61 billion, driven by an 18.0% increase in Pharmacy revenues and 17.6% growth in Front store revenues. Total same store sales grew 5.7% in the quarter, with an 8.0% increase in pharmacy same store sales, despite negative impact of approximately 380 basis points due to recent generic introductions. Pharmacy same store sales were, however positively impacted by approximately 250 basis points due to Maintenance Choice. Front store same store sales increased 0.8%.
The generic dispensing rate in the pharmacy services segment increased 320 basis points to 68.3% in the third quarter, while the generic dispensing rate in the retail segment increased approximately 210 basis points to 70.1%.
CVS Caremark's retail sales have benefited from its Maintenance Choice program, which allows customers to pick up 90-day prescriptions at a CVS drugstore instead of receiving them through the mail for the same price.
Year-To-Date Results For the first nine months of fiscal year 2009, CVS Caremark's net earnings available to common shareholders were $2.65 billion or $1.81 per share from $2.25 billion or $1.54 per share.
Earnings from continuing operations for the period increased to $2.7 billion or $1.82 per share from $2.4 billion or $1.63 per share in the year-ago period. Adjusted earnings per share from continuing operations were $1.96, up from $1.75 in the same period last year.
Net revenues for the nine months were $72.91 billion, higher than $63.33 billion in the year-ago period.
Outlook
For fiscal year 2009, CVS Caremark lifted the lower end of its outlook range for adjusted earnings per share from continuing operations, citing its continued strong performance year to date.
Adjusted earnings per share from continuing operations, excluding the effect of the tax benefit, is now projected in a range of $2.61-$2.64 per share, compared to the prior range of $2.59-$2.64 per share. Analysts expect the company to report earnings of $2.62 per share for the year.
Stock Quotes
CVS closed Wednesday's trading session at $36.15, up $0.72 on a volume of 12.67 million shares. In Thursday's pre-market trading, the stock is trading at $36.03, down $0.12 or 0.33%. The stock has been trading between $23.19 and $38.27 in the past 52 weeks.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.