CVS Caremark Corp. said Tuesday its profit rose 4.5 percent in the first quarter on improvement at both its drugstores and its pharmacy benefits management business.
CVS also raised the low end of its profit forecast for the year, pointing to its first-quarter results and confidence about its performance for the rest of the year.
But its reduced its revenue expectations, saying total revenue will be equal or slightly lower than its 2009 results. It said that was because of the weak flu season.
Its shares dropped 67 cents, or 1.8 percent, to $36.41 in morning trading.
Despite the weak flu season and bad weather, revenue at CVS drugstores rose 4 percent. Revenue rose 3 percent at the Caremark pharmacy benefits management business although it lost several major contracts at the end of 2009 and some lost Medicare Part D prescription drug business.
The company said it earned $771 million, or 55 cents per share, for the three months ended March 31, up from $738 million, or 50 cents per share, a year ago. Excluding one-time items, the company said it earned 60 cents per share. That's 2 cents a share more than analysts expected, according to a survey by Thomson Reuters.
CVS said its legal costs decreased, and it spent less money integrating the Longs Drugs Stores network, which it bought in early 2009.
CVS said total revenue edged up 2 percent to $23.76 billion from $23.4 billion a year agio. Analysts expected revenue of $24.12 billion.
The company runs 7,063 drugstores around the country, about 400 hundred less than rival Walgreen Co. CVS said sales at stores open at least a year rose 2.3 percent. At those stores, pharmacy revenue grew 3.7 percent as more customers filled prescriptions through Caremark's Maintenance Choice program, which allows members to pick up 90-day prescriptions at stores or have their orders delivered by mail. Because of the weak flu season and tough winter weather, nonpharmacy sales at stores open at least a year fell 0.7 percent.
CVS said the Longs Drugs Stores it acquired in 2008 also had weaker sales.
At the Caremark pharmacy benefits management unit, revenue rose 3 percent to $11.84 billion. CVS said its results got a boost from an accounting change related to RxAmerica, the pharmacy benefits unit run by Longs. Caremark filled 132 million retail network claims in the first quarter, down by about 15 million. The company said that total decreased because it was less successful in bidding for Medicare Part D drug coverage business.
In November, CVS disclosed that Caremark had lost contracts worth a total of $4.8 billion in 2010. A month earlier, it said it would lose coverage of about 500,000 members who were eligible for both Medicare Part D and Medicaid, which cost it another $1.7 billion in revenue.
CVS said 15.5 million claims were filled through the mail in the first quarter. That was down from a year ago because of the contract losses.
CVS Caremark now expects an adjusted profit of $2.77 to $2.84 per share this year, compared to a previous range of $2.74 to $2.84 per share. The company said revenue will be flat or down as much as 2 percent compared to last year. The company reported $98.73 billion in revenue in 2009.
Analysts expect $2.79 per share and $99.19 billion in revenue on average.
The company forecast an adjusted profit of 66 cents to 68 cents per share in the second quarter and said revenue will fall 2 to 4 percent from the $24.87 billion it reported in 2009. That suggests $23.88 billion to $24.37 billion. Analysts expected 68 cents per share and $24.72 billion in revenue.
CVS opened 48 retail stores during the quarter, and closed 10 stores and two specialty pharmacies. It relocated 53 stores. In addition to its retail locations, CVS runs 47 specialty pharmacies, in addition to mail order pharmacies. Its stores are spread across 44 states, Washington, D.C., and Puerto Rico.
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