Can CVS Caremark Keep Growing?

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With shares of CVS Caremark (NYSE:CVS) trading around $68, is CVS an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

CVS Caremark is a pharmacy and healthcare provider in the United States. The company operates in three business segments: Pharmacy Services, Retail Pharmacy, and Corporate. The products and services offered at CVS Caremark stores may be deemed as essential by many consumers in the United States. As CVS Caremark provides an efficient and affordable healthcare and pharmacy experience, look for it to see rising profits.

Less than a week after shocking the country and announcing that it will no longer sell tobacco products, pharmacy giant CVS Caremark CVS reported fourth-quarter profit and revenue growth that came in above what Wall Street was expecting, largely due to an increase in prescription volume. CVS reported $32.8 billion in fourth-quarter revenue, up 4.6 percent over the same quarter in 2012 and edging above Street estimates of $32.7 billion. Fourth-quarter net income increased 12 percent to $1.3 billion, resulting in earnings of $1.05 per share. CVS reported earnings of $1.12 per share, beating the analyst consensus of $1.11 per share and marking a 15.8 percent increase over the same quarter in 2012. On a full-year basis, CVS’ 2013 revenue increased 3 percent to $126.8 billion. Full-year net income increased 19 percent to $4.6 billion, resulting in earnings of $3.75 per share; excluding special items, full-year earnings were $4.00 per share.

“I am very pleased with our fourth-quarter results, which came in at the high end of our expectations and helped produce a record year,” Larry Merlo, CVS president and CEO, said in a statement Tuesday morning. He added that the period was “somewhat atypical,” largely due to fewer Medicare Part D claims that resulted from sanctions placed on CVS by the Centers for Medicare and Medicaid Services in 2013 over the pharmacy’s marketing of the plan.

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