CVS Caremark Corp Earnings: Margins Shrink Again, but Net Income Climbs

S&P 500 (NYSE:SPY) component CVS Caremark Corporation (NYSE:CVS) reported its results for the first quarter. CVS Caremark provides prescriptions and related health care services and products.

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CVS Caremark Earnings Cheat Sheet for the First Quarter

Results: Net income for the retail-drug stores rose to $776 million (59 cents per share) vs. $713 million (52 cents per share) in the same quarter a year earlier. This marks a rise of 8.8% from the year-earlier quarter.

Revenue: Rose 19% to $30.8 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: CVS Caremark Corporation reported adjusted net income of 65 cents per share. By that measure, the company beat the mean estimate of 63 cents per share. Analysts were expecting revenue of $30.31 billion.

Quoting Management: Larry Merlo, president and CEO, stated: “We posted an outstanding first quarter with strong results across the board. Results in both our retail and PBM segments came in at the high end of our guidance, while EPS exceeded expectations. We also generated $2.4 billion in free cash during the quarter, which places us comfortably on track to achieve our goal for the year.”

Key Stats:

Last quarter was the fifth in a row that the company saw shrinking gross margins, as they fell 1.8 percentage points from the year-earlier quarter to 16.6%. In that span, margins have contracted an average of 1.8 percentage points per quarter on a year-over-year basis.

The company has now seen net income rise in three straight quarters. In the fourth quarter of the last fiscal year, net income rose 3.7% and in the third quarter of the last fiscal year, the figure rose 7.3%.

Revenue has risen the past four quarters. Revenue increased 14.3% to $28.32 billion in the fourth quarter of the last fiscal year. The figure rose 11.7% in the third quarter of the last fiscal year from the year earlier and climbed 10.9% in the second quarter of the last fiscal year from the year-ago quarter.

The company beat estimates last quarter after being in line with expectations in the fourth quarter of the last fiscal year with net income of 89 cents per share.

Looking Forward: For next quarter, analysts have a more positive outlook about the company’s expected results. The average estimate for the second quarter is 74 cents per share, up from 72 cents ninety days ago. Over the past three months, the average estimate for the fiscal year has climbed from $3.25 per to share to $3.27.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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