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NEW YORK — As consumers and businesses seek health care benefits and services to meet their specific needs, CVS Caremark Corp. has the “ability and agility” to provide what they’re looking for, president and chief executive officer Larry Merlo said at the company’s annual analyst day.
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Larry Merlo |
At the event Wednesday morning, Merlo and other CVS Caremark executives outlined the company’s long-term growth strategies and provided 2014 guidance, highlighting an outlook for growth across the enterprise.
“CVS Caremark has an in-depth understanding of the changing health care landscape, including the challenges and opportunities that lie ahead. These changes in the environment are creating opportunities for the company, and our unique combination of ability and agility positions us to capitalize on these opportunities — however they take shape,” Merlo told analysts.
“We are seeing what we call the ‘retailization’ of health care, which is the rise of consumerism, fueled in large part by the increasing numbers of individuals in consumer-driven health plans,” he explained. “Our response to changes in the environment is to drive purposeful innovation to better meet the changing needs of clients and customers. CVS Caremark has decades of experience in a business-to-consumer as well as a business-to-business environment and we are very well positioned to win share.”
He and other executives emphasized CVS Caremark’s business model that focuses on enhancing access, lowering costs and improving health outcomes through its “consumer-driven, channel-agnostic solutions that create real value for patients, customers and clients.’’
At the meeting, Dave Denton, executive vice president and chief financial officer, reaffirmed the company’s guidance for 2013 and outlined guidance for 2014. The company expects to deliver adjusted earnings per share from continuing operations of $4.36 to $4.50 in 2014, an increase of 10.25% to 13.75% excluding the 4-cent gain from a legal settlement in the third quarter of 2013. The company expects to deliver GAAP diluted earnings per share from continuing operations of $4.09 to $4.23 per share and expects to generate substantial free cash flow of $5.1 billion to $5.4 billion, and cash from operations of $6.6 billion to $6.9 billion in 2014.
On average, analysts forecast adjusted earnings of $4.47 per share for CVS in 2014, with estimates ranging from a low of $4.36 to a high of $4.57, according to Thomson Financial.
“CVS Caremark has a strong track record of meeting or exceeding our financial targets,” said Denton. “The outlook for 2014 is bright, and we are focused on strategies that will lead to solid, long-term enterprise growth. We continue to generate a substantial amount of free cash flow, and we remain committed to disciplined capital allocation practices that drive value for our shareholders.”
The company also announced that its board of directors has approved an increase in its quarterly dividend of about 22%, to $0.275 per share on the common stock of the company, payable Feb. 3, 2014, to shareholders of record on Jan. 23, 2014.
In addition, the company said its board has authorized a new share repurchase program, for up to $6 billion of its outstanding common stock.
Also at the meeting, company executives outlined key challenges and opportunities emerging in a health care environment that is undergoing what they described as its most transformative shift in decades and identified priority initiatives that define the company’s enterprise growth strategy. Among the areas of focus are succeeding in the evolving pharmacy benefit management marketplace, capitalizing on the specialty pharmacy opportunity, driving growth in its CVS/pharmacy retail operation through personalization, unlocking adherence through pharmacy excellence and transforming primary care through the expansion of MinuteClinic walk-in medical clinics.
“Our enterprise growth strategy will continue to capitalize on our unique competitive advantages,” concluded Merlo. “We’re focused on winning new lives, whether or not we are the PBM, and on capturing greater share of pharmacy spend across all channels. We will continue to drive operational efficiencies and excellence in execution along with continuous innovation to better meet the changing needs of our customers. With the building blocks of our enterprise strategy in place, we have a strong outlook for 2014 and beyond.”
