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updated: 8/5/2014 8:48 AM

CVS 2Q profit climbs 11 percent

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  • CVS Caremark's second-quarter earnings jumped 11 percent to top expectations, as more specialty and generic drug use helped fuel growth for the drugstore chain and pharmacy benefits manager.

      CVS Caremark's second-quarter earnings jumped 11 percent to top expectations, as more specialty and generic drug use helped fuel growth for the drugstore chain and pharmacy benefits manager.
    Associated Press

 
By TOM MURPHY
AP Business Writer

CVS Caremark's second-quarter earnings jumped 11 percent to top expectations, as more specialty and generic drug use helped fuel growth for the drugstore chain and pharmacy benefits manager.

The Woonsocket, Rhode Island, company also raised its earnings forecast for 2014. Its shares rose in premarket dealings Tuesday.

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CVS Caremark runs the nation's second-largest drugstore chain after Walgreen Co. and one of the largest pharmacy benefits management, or PBM, businesses. Revenue from its PBM side jumped 16 percent, and operating profit from that segment soared 30 percent, helped by new business and specialty drug growth.

Specialty drugs are very expensive, usually injected, drugs for complex chronic health conditions -- a category that is driving overall spending on medications.

Generic drugs also helped the company's PBM and retail pharmacy businesses in the second quarter. Generic drugs, which are cheaper than their brand-name equivalents, help drugstore profitability because they provide a wider margin between the cost for the pharmacy to purchase the drugs and the reimbursement it receives.

Overall, CVS Caremark earned $1.25 billion, or $1.06 per share, in the quarter that ended June 30. That's up from $1.12 billion, or 91 cents per share, in the same quarter a year ago.

Earnings, adjusted for amortization costs, came to $1.13 per share. The average estimate of analysts surveyed by Zacks Investment Research was for earnings of $1.10 per share.

The company said revenue climbed 11 percent to $34.6 billion from $31.25 billion in the same quarter a year ago. That also beat the average analyst expectation of $33.42 billion.

CVS Caremark now expects 2014 adjusted earnings to range between $4.43 and $4.51 per share, compared to its previous forecast for earnings of $4.36 to $4.50 per share.

Analysts expect $4.46 per share, on average, according to FactSet.

Shares of CVS Caremark climbed $1.13, or 1.5 percent, to $78.50 in premarket trading Tuesday about an hour and 15 minutes before the market open. The stock had climbed about 8 percent to $77.37 since the beginning of the year, as of Monday's close.

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