CVS Caremark Earnings Cheat Sheet: Margins Shrink as Net Income Drops

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

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CVS Caremark Earnings Cheat Sheet for the Second Quarter

Results: Net income for the drug store fell to $816 million (60 cents per share) vs. $821 million (60 cents per share) a year earlier. This is a decline of 0.6% from the year earlier quarter.

Revenue: Rose 10.9% to $26.63 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: CVS reported adjusted net income of 65 cents per share. By that measure, the company beat the mean estimate of 64 cents per share. Analysts were expecting revenue of $26.76 billion.

Quoting Management: Larry Merlo, President and Chief Executive Officer, stated, “I’m very pleased with our second quarter results, which were at the high end of our guidance. While our Pharmacy Services business performed as expected, the Retail business exceeded our goals due to solid expense control and higher than expected generic utilization. At the same time, we generated more than $800 million in free cash in the quarter, bringing our year-to-date free cash flow to $2.4 billion.”

Key Stats:

The company has now topped analyst estimates for the last four quarters. It beat the mark by 2 cents in the first quarter, by one cent in the fourth quarter of the last fiscal year, and by one cent in the third quarter of the last fiscal year.

Gross margin shrank 1.8 percentage points to 19.1%. The contraction appeared to be driven by increased costs, which rose 13.4% from the year earlier quarter while revenue rose 10.9%.

Net income has dropped 7.7% year over year on average across the last five quarters. Performance was hurt by a 20.8% decline in the third quarter of the last fiscal year from the year earlier quarter.

The company’s revenue has now risen for two straight quarters. In the first quarter, revenue increased 8.9% to $25.88 billion from the year earlier quarter.

Competitors to Watch: Walgreen Company (NYSE:WAG), Rite Aid Corporation (NYSE:RAD), PharMerica Corporation (NYSE:PMC), Medco Health Solutions Inc. (NYSE:MHS), drugstore.com, inc. (NASDAQ:DSCM), PetMed Express, Inc. (NASDAQ:PETS), Wal-Mart (NYSE:WMT), Target (NYSE:TGT), Graymark Healthcare Inc (NASDAQ:GRMH), BioScrip Inc. (NASDAQ:BIOS)…

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(Source: Xignite Financials)

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