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CVS Caremark caps off 2012 with strong 4Q
February 6th, 2013
WOONSOCKET, R.I. – Double-digit revenue gains helped drive increased earnings at CVS Caremark Corp. for the 2012 fourth quarter and fiscal year.
The company said Wednesday that net revenue for the three months ended Dec. 31 rose 10.9% to $31.4 billion from $28.3 billion a year earlier.
In the retail drug store segment, sales grew 5.1% to $16.3 billion in the fourth quarter. Same-store sales were up 4% year over year, reflecting gains of 4% in the pharmacy and 3.9% in the front end. CVS noted that calendar day shifts positively impacted comparable pharmacy sales by about 80 basis points, while the introduction of lower-priced generic drugs had a negative impact of 11 percentage points.
The company said that in the fourth quarter, same-store prescription volume climbed 9% with 90-day scripts counted as one prescription. With 90-day prescriptions each counted as three prescriptions, comparable-store prescription volume was up 11% for the quarter.
Meanwhile, the pharmacy benefit management business, known as the Pharmacy Services segment, saw revenue surge 17.4% to $18.6 billion for the fourth quarter. CVS attributed the gain mainly to new 2012 client starts, drug cost inflation and the growth of its Medicare Part D program. The company noted that continued PBM client adoption of its Maintenance Choice program, in which mail order patients can elect to pick up prescriptions at CVS/pharmacy stores, helped fueld a 14.6% increase in mail choice claims processed during the quarter.
CVS added that the generic dispensing rate climbed in the fourth quarter by about 400 basis points to 79.9% in the retail pharmacy segment and by 500 basis points to 80% in otheur Pharmacy Services.
On the earnings side, income from continuing operations attributable to CVS Caremark rose to $1.13 billion from $1.10 billion for the 2012 fourth quarter. The company said the gain stemmed primarily from improved operating profit in its drug store and PBM businesses.
Adjusted earnings per share (EPS) from continuing operations attributable to CVS Caremark came in at 97 cents in the fourth quarter, up from 89 cents in the prior-year period. CVS noted that the EPS result reflects a loss of $348 million, or 17 cents per share, from early extinguishment of debt recognized in the quarter. Excluding that loss, adjusted EPS for the fourth quarter was $1.14.
Financial analysts, on average, had projected CVS' fourth-quarter adjusted EPS at $1.10, with estimates ranging from a low of $1.06 to a high of $1.12, according to Thomson Financial.
"I'm very pleased with our fourth-quarter results," CVS Caremark president and chief executive officer Larry Merlo said in a statement. "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 3 cents per share."
For the 2012 fiscal year ended Dec. 31, CVS Caremak saw total revenue jump 15% to $123.1 billion from $107.1 billion in 2011. Sales grew 6.8% to $63.7 billion for the year in the retail pharmacy segment. Same-store sales were up 5.5%, including gains of 6.5% in the pharmacy and 3.4% in the front end. In the PBM segment, overall revenue for 2012 swelled 24.7% to $73.4 billion from $58.9 billion in 2011.
The company reported that income from continuing operations attributable to CVS Caremark came in at $3.9 billion for 2012, up 11.3% from $3.5 billion in the prior year. Adjusted EPS for 2012 was $3.27, up from $2.80 in 2011. Excluding the 17 cents-per-share loss on early debt extinguishment in the fourth quarter, adjusted EPS for was $3.43 for 2012. The consensus analyst estimate was for EPS of $3.40, with projections running from a low of $3.37 to a high of $3.43.
CVS said that in the fourth quarter it opened 37 new retail drug stores, closed two stores and relocated eight stores. As of Dec. 31, the company had 7,458 retail drug stores, 19 on-site pharmacies, 31 retail specialty pharmacy stores, 12 specialty mail-order pharmacies and five mail-order pharmacies.
Looking ahead, CVS Caremark forecasts adjusted EPS of $3.86 to $4.00 for 2013, in line with the average analyst estimate of $3.94.
"The company also reiterated its first-quarter 2013 adjusted EPS guidance of 77 cents to 80 cents," William Blair & Co. analyst Mark Miller stated in a research note Wednesday. "This appears to be conservative given the higher incidence of flu in January. We are preliminarily increasing our 2013 EPS estimate up by 2 cents, to $3.97."
Analysts' EPS projections for CVS' 2013 full fiscal year range from a low of $3.85 to a high of $4.10, according to Thomson Financial.