NEW YORK (AP) – CVS Caremark Corp. said its profit rose 4.5 percent in the first quarter, but said the mild cold and flu season hurt its sales.
CVS 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 it reduced its revenue expectations, saying total revenue will be equal or slightly lower than its 2009 results. It said that was because of the surprisingly mild flu season, which has also hurt results for CVS’ competitors.
CVS shares fell 60 cents, or 1.6 percent, to close at $36.48 Tuesday. World markets traded lower Tuesday due to concerns that European countries won’t back a $144 billion package for Greece, or potentially larger bailouts for other nations.
Despite the mild flu season, which hurt sales of nonprescription cold and flu items, revenue at CVS drugstores rose 4 percent. The company said bad weather in the mid-Atlantic states also hurt its sales. 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. That was up 4.5 percent from the $738 million, or 50 cents per share, it reported 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.
Revenue edged up 2 percent to $23.76 billion from $23.4 billion a year ago. 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. Prescription revenue increased, but sales of non-pharmacy items fell because of the slow flu season and tough winter weather. CVS said its legal costs decreased, and it spent less money integrating the Longs Drugs Stores network, which it bought in early 2009.
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.
The Woonsocket, R.I. company was optimistic Tuesday about the few contract renewals remaining in 2010. CVS said it has relatively few contracts to renew in 2011, and so far, it has gained more business than it has lost for that year. However it will lose about $400 million in revenue from insurer Health Net, which sold its Northeast division to UnitedHealth.
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.
Date: May 4, 2010
Source: Associated Press