Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

On Feb 26, 2013, we reiterated our long-term Neutral recommendation on CVS Caremark (CVS - Analyst Report) following the strong fourth-quarter 2012 results.

Why Neutral?

As reported on Feb 6, CVS’ fourth-quarter 2012 earnings and revenues beat the Zacks Consensus Estimate quite comprehensively. Its adjusted earnings rose 28.1% year over year to $1.14, beating the Zacks Consensus Estimate by 3.6%.  Net revenue shot up 10.9% to $31.4 billion, surpassing the Zacks Consensus Estimate. We note that the company surpassed its financial goals for 2012.

The company anticipates benefits from the debt tender offer and refinancing initiatives. CVS has thereby raised its adjusted earnings outlook for 2013 and currently expects adjusted earnings in the band of $3.86-$4.00 for the ongoing year while the current Zacks Consensus Estimate is pegged at $3.92. Analysts have revised estimates upward following the release of the fourth-quarter results. Given the bullish estimates, the stock carries a Zacks Rank #2 (Buy).

CVS gained from the earlier Walgreens (WAG - Analyst Report)-Express Scripts (ESRX - Analyst Report) impasse in 2012. While CVS met its goal of retaining 60% of the scripts gained from Walgreens during the impasse, we are apprehensive about the company’s optimistic target of retaining the same throughout 2013. We believe that CVS might lose momentum on account of the resolution.

While the tussle for market share with the retail giant raises concern, CVS also continues to lag Express Scripts in Pharmacy Business Management (PBM). The situation is not likely to improve in 2013. Adding to our concerns, macroeconomic conditions remain unyielding.

As health care costs continue to climb despite the current economic doldrums and severe budget pressures, the need for innovative solutions like PBM continues to grow. However, drug retail and PBM is a highly competitive business in the U.S. Although CVS is set on a growth trajectory, the tough competitive landscape warrants caution. Thus, we prefer to remain on the sidelines.

Other Stocks to Consider

Apart from CVS, Cardinal Health (CAH - Analyst Report) which carries a Zacks Rank #2 (Buy) warrants a look.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%