For Immediate Release
Chicago, IL – November 16, 2011 – Zacks.com announces the list
of stocks featured in the Analyst Blog. Every day the Zacks Equity
Research analysts discuss the latest news and events impacting
stocks and the financial markets. Stocks recently featured in the
blog include CVS Caremark ( CVS),
Aetna ( AET), Universal American
Corp. ( UAM), Walgreen ( WAG) and
Express Script ( ESRX).
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Here are highlights from Tuesday’s Analyst
Blog:
Earnings Scorecard: CVS Caremark
Subsequent to the announcement of CVS
Caremark’s ( CVS) third quarter 2011 results on November
3, 2011, we witness a mixed trend in the analysts’ estimate
revisions.
Street analysts have had nearly a week to ponder over the news.
In the subsequent paragraphs, we will cover the recent earnings
announcement, subsequent analysts’ estimate revisions as well as
the Zacks Rank and long-term recommendation on the stock.
Third Quarter Highlights
CVS Caremark reported EPS of 65 cents in the third quarter, up
8.3% year over year. However, after excluding the impact of certain
one-time items, adjusted EPS came in at 70 cents, surpassing the
Zacks Consensus Estimate of 67 cents and 9.3% higher than the
year-ago level.
Net revenue increased 12.5% year over year to $26.7 billion,
almost in line with the Zacks Consensus Estimate, primarily due to
strong performance of the Pharmacy Services segment. The segment
recorded a robust 25.8% increase in revenues to $14.8 billion
during the reported quarter. The significant growth was primarily
on the back of the long-term contract with Aetna (
AET) as well as the acquisition of the Medicare Part D business of
Universal American Corp. ( UAM).
Moreover, benefits from the company’s streamlining initiatives
are expected to outweigh related costs in 2012. The company eyes
further progress in the PBM segment based on its new business wins
and strong client retention. By the end of the third quarter, the
company completed more than 70% of 2012 renewals, which include
AT&T, General Electric and a FEP Retail Contract worth $4
billion.
Based on a solid quarter, CVS Caremark updated its EPS outlook
for fiscal 2011. The company now expects adjusted EPS of
$2.77–$2.81 (earlier guidance being $2.75–$2.81). The guidance for
cash flow from operations and free cash flow for fiscal 2011,
however, remained unchanged at $5.5–$5.6 billion and $4.0–$4.2
billion, respectively.
For a full coverage on the earnings, read: CVS Posts a Strong
Quarter
Agreement of Analysts
Estimate revision trends for the upcoming fourth quarter of
fiscal 2011 and the first quarter of fiscal 2012 depicted the
analysts’ mixed sentiments.
Over the past 30 days, 6 of the 16 analysts covering the stock
have made downward revisions while 3 analysts raised their
estimates for the fourth quarter. Besides, estimates for fiscal
2011 were raised by 13 analysts while none moved in the opposite
direction. For the first quarter of fiscal 2012, only one analyst
raised the estimate while 2 reduced the same.
After several quarters of declining revenues resulting from the
disappointing results in the PBM segment, the analysts are
encouraged by the improved performance of CVS Caremark’s Pharmacy
Services segment for the third consecutive quarter.
Although concerns linger given the margin pressure, the analysts
are confident about CVS Caremark’s longer-term potential, based on
its retail execution, deployment potential and strong 2012 generics
cycle. Moreover, the firms believe the healthcare reform will open
up new avenues for the company. Alongside, CVS Caremark is looking
to benefit from the ongoing Walgreen (
WAG)-Express Script ( ESRX) dispute for retail
contract renewal.
Magnitude of Estimate Revisions
In the past 7 days, the magnitude of estimate revisions for the
fourth quarter of 2011, fiscal 2011 and first quarter 2012 remained
unchanged at 89 cents, $2.80 and 63 cents, respectively.
Our Recommendation
During the third quarter of 2011, improved performance was
observed in the Pharmacy Services segment for the third consecutive
quarter. CVS Caremark is also adopting several strategies to ensure
consistent growth in its business. We are encouraged by its several
recent contract wins, which would help maintain the growth momentum
in coming years. Also, the company intends to take advantage of the
ongoing Walgreen-Express Script dispute, which if successful will
further bolster its Retail segment. However, margins continue to
remain under pressure. We reiterate a Neutral recommendation on the
stock.
CVS Caremark holds a Zacks #2 Rank, implying a short-term Buy
rating on the stock. Besides, the company retains a long-term
Neutral recommendation on the stock.
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AETNA INC-NEW (AET): Free Stock Analysis Report
CVS CAREMARK CP (CVS): Free Stock Analysis Report
EXPRESS SCRIPTS (ESRX): Free Stock Analysis Report
UNIVL AMERICAN (UAM): Free Stock Analysis Report
WALGREEN CO (WAG): Free Stock Analysis Report
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