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CVS raises guidance on solid Q1 performance


WOONSOCKET, R.I. — CVS Caremark’s president and CEO Larry Merlo told analysts Wednesday morning that he was “very pleased” with its first quarter, as results across both the retail and pharmacy benefit management segments came in at the high end of expectations and its integrated assets continue to demonstrate success and improve patient lives.

“Overall, this was a terrific quarter with strong results across the board, including our cash generation,” Merlo told analysts. During the quarter, the company generated $4.2 billion in free cash flow.

During the first quarter ended March 31, CVS Caremark achieved the expected benefit of 3 cents per share from Walgreens’ battle with Express Scripts. Should the impasse between Walgreens and Express Scripts remain unresolved, CVS Caremark will report the estimated impact on a quarter-by-quarter basis throughout the year. For the second quarter, it is projecting a benefit of 3 cents to 4 cents per share, should the situation remain unresolved.

“The benefit is expected to be slightly higher than the first quarter, primarily driven by greater operating efficiency in our pharmacies, and we’ll also see a full quarter’s run rate of ESI script volumes that transferred throughout the first quarter, as well as a modest ramp in the front-store benefit from these new customers,” Merlo said.

In light of this, as well as its solid first-quarter performance, CVS Caremark raised its earnings guidance for the full year 2012. The company raised full-year adjusted earnings per share to $3.23 to $3.33, with both ends of the range up 5 cents from its guidance issued earlier this year.

Revenues in the pharmacy services segment rose 32.3% to $18.3 billion during the quarter. In turning to the retail business, same-store sales rose 8.4%. Pharmacy same-store sales rose 9.8%, while front-end same-store sales rose 5.3%. Revenues in the retail pharmacy segment increased 9.9% to $16 billion during the quarter.

“Overall, I am very pleased with our front-store sales this quarter. We saw increased customer traffic and a slightly higher average ticket. Our ExtraCare loyalty program continues to be a key differentiator for us. We’ve had the program in place for well over a decade, and now with 69 million active cardholders, we continue to find new ways to enhance the offering. As an example, our ExtraCare Beauty Club already boasts more than 12 million members and is helping to drive sales across the beauty business,” Merlo told analysts.

Net revenues during the quarter increased 19.9% to $30.8 billion. Net income attributed to CVS Caremark totaled $776 million, or 59 cents per diluted share, compared with $713 million, or 52 cents per diluted share, in the year-ago period.

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