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CVS Unveils FY14 Outlook, Growth Plan
CVS CAH HLF
CVS Caremark ( CVS - Analyst Report) registered a steep rise of 4.31% on Wednesday following the disclosure of a positive guidance for 2014 sales and earnings. The company demonstrated its focus on enterprise growth and underlined its commitment toward enhancing shareholders value.
On its annual Analyst Day at New York City, CVS Caremark declared that it expects 2014 revenues to rise between 4% and 5.25% year over year, with big gains in its pharmacy benefits management business, mitigating softer growth at its drugstores.
Though the changing healthcare landscape poses challenges, CVS foresees opportunities to further its long-term growth plan by increasing earnings and revenues.
Further, the pending acquisition of one of the leading providers of comprehensive infusion services – Coram, is expected to prove beneficial for CVS. The acquisition should provide additional areas of growth complemented by stronger offerings in the marketplace.
Additionally, CVS Caremark’s recently announced deal with Cardinal Health, Inc ( CAH - Analyst Report) to form one of the largest generic sourcing entities in the U.S. is likely to launch in the second half of 2014. Such developments are considered to favourably impact both volume and efficiency. The two entities have recently renewed their existing pharmaceutical distribution contract for three years through Jun 2019.
Taking into account these positive factors, CVS Caremark expects its adjusted earnings for 2014 to be in the range of $4.36–$4.50, reflecting growth of 10.25–13.75% from expected 2013 levels. It also hopes to generate substantial free cash flow of $5.1 billion to $5.4 billion, while cash from operations are expected to vary in the range of $6.6 billion to $6.9 billion in 2014.
The recent approval by the board of directors to hike the quarterly dividend by 22% to 27.5 cents per share reflects management’s confidence of delivering robust growth. CVS Caremark also unveiled a new $6 billion share buyback program and plans to complete $4 billion worth of share repurchases during 2014.
Further, CVS Caremark aims to lay greater focus on areas like pharmacy benefit management (PBM) through new client wins along with healthy absorption in existing health plans. Specialty pharmacy is another promising revenue generator that CVS wants to capitalize on.
Moreover, to enhance its retail business, CVS is relying on its strong network of strategically-located retail drugstores, popularly called MinuteClinics, across the U.S. The company expects these stores to give strong competition to pharmacy majors like Walgreen Co. .
CVS Caremark currently has a Zacks Rank #3 (Hold) but Herbalife Ltd. ( HLF - Snapshot Report) carries a Zacks Rank #2 (Buy).