CVS Caremark's Q1 results forge ahead despite weak flu season

WOONSOCKET, R.I. Despite a weak flu season and unfavorable weather in some regions, CVS Caremark posted record first-quarter revenues and earnings.

"I'm happy to report another solid quarter this morning and continued share gains in retail and growth in our generic dispensing in mail and retail and better expense leverage that enabled us to deliver on-plan operating margins for the quarter," Tom Ryan, chairman, president and CEO, told analysts, noting that the positive results occurred despite a weak flu season and severe weather in some key retail markets.

Net revenues for the three months ended March 31 increased $366 million to $23.8 billion, up from $23.4 billion during the year-ago period.

Net income attributable to CVS Caremark was $771 million, or 55 cents per diluted share, compared with $738 million, or 50 cents per share, in the year-ago period.

On the retail side of the business, revenues rose 3.6% to $14 billion. Same-store sales increased 2.3%. Pharmacy same-store sales rose 3.7% and were negatively impacted by about 290 basis points because of recent generic introductions and were positively impacted by roughly 260 basis points due to the continued growth of the Maintenance Choice program. Front-end same-store sales decreased 0.7% and, as expected, were negatively impacted by the inclusion of the acquired Longs stores and benefited from an earlier Easter this year.

In the pharmacy services segment, revenues rose 2.6% to $11.8 billion due largely to the conversion of a number of RxAmerica pharmacy network contracts. Adjusting the growth rate for the impact of new generics, net revenues would have grown 7.7% in the pharmacy services segment.

The company raised the mid-point earnings per share guidance range for the full year 2010. The company increased the low-end of earnings per share guidance by 3 cents and now expects adjusted earnings per share from continuing operations to be in the range of $2.77 to $2.84 and GAAP earnings per share from continuing operations to be between $2.58 and $2.65.