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Shares of CVS Caremark (CVS - Analyst Report) reached a new 52-week high of $52.63 on Wednesday, Jan 23, 2013. The stock continues to edge past resistance levels, beating its previous 52-week high of $52.42 attained on Jan 17, 2013.

With a solid one-year return of 29.1% and a track-record of posting in-line or higher quarterly earnings, this integrated pharmacy service provider offers an attractive investment opportunity.

The Stock Driver

A profound mix of favorable industry dynamics, solid guidance for 2013, benefits from the retention of Walgreens (WAG - Analyst Report) customers from the earlier Walgreens-Express Scripts (ESRX - Analyst Report) impasse and increasing shareholder value are driving CVS Caremark. Further, management asserts that the company has exceeded its financial goals for 2012.

With the worst flu season in a decade in the U.S., the rising demand for vaccines at the largest provider of prescription and related health care services is a lucrative opportunity to garner incremental revenues. Further, demographic tailwinds should drive utilization rates in the domestic market.

Notably, the introduction of generics in the pharmaceutical industry has increased profitability at CVS Caremark. The company envisages an upsurge in profitability for 2013 on the back of the generic wave.

CVS Caremark’s retail segment benefited from the recent fallout between Walgreens and Express Scripts. The company witnessed a record share gain in the recent past with 24 million script wins in 2012. Despite the resolution of the impasse, management commentary of retaining 60% of the prescription volumes gained from the stalemate of these stalwarts is encouraging.

In the interim, CVS Caremark continues to reward its shareholders via dividends and share repurchases. The company plans to increase its dividend payout ratio to 25% (currently 21%) in 2013 and 30% through 2015.

In light of these facts, CVS Caremark envisages adjusted earnings per share of $3.84 to $3.98 for 2013, reflecting year-over-year growth in the band of 13.25% and 17.25%. The current Zacks Consensus Estimate of $3.91 is the midpoint of the company’s forecast.

The estimate revision trend reflects a bullish sentiment towards CVS Caremark for 2013. The upward revision in Zacks Consensus Estimate for 2013 over the last 60 days depicts ample positive driving events.

Accordingly, the stock carries a Zacks Rank #2 (Buy). Drug retailer Rite Aid Corporation (RAD - Analyst Report), carrying a Zacks Rank #1 (Strong Buy), also warrants a look.

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