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WOONSOCKET, R.I. (Reuters)—CVS Caremark Corp. posted a bigger-than-expected rise in quarterly profit Monday as it began to attract more business to its pharmacy benefits management unit.
While total sales missed analysts' projections, sales at drugstores open at least a year far outpaced recent results at larger U.S. drugstore chain Walgreen Co.
Overall results "were decent, especially in the face of a tough economy," said Wachovia analyst Matt Perry.
Fourth-quarter profit rose to $1.05 billion, or 74 cents per share, from $949 million, or 65 cents per share.
Adjusted earnings per share rose to 79 cents from 70 cents, topping analysts' average forecast of 78 cents, according to Thomson Reuters I/B/E/S.
Revenue climbed 7% to $25.8 billion but fell short of analysts' expectations of $26.22 billion.
Retail pharmacy sales rose 4.5% to $14.5 billion, while sales at drugstores open at least a year rose 4.9%.
Pharmacy services revenue jumped 14.5% to $13.5 billion. The PBM business, which grew when CVS acquired Caremark Rx Inc. in March 2007, administers prescription drug benefits for employers and health plans and operates a large mail-order pharmacy.
Its growth came a quarter after CVS said the PBM had lost about $4.8 billion in contracts heading into 2010, leading to the departure of the unit's president. In December, CVS won an extension on its contract with a Texas pension fund worth about $1 billion. It later named Per Lofberg as the new president of the PBM.
CVS said it processed 5.6% percent fewer pharmacy network claims in the latest fourth quarter, as it lost two big clients and had three fewer reporting days in the quarter. The addition of new clients, and more clients using its mail choice service helped offset those declines.
Mail choice claims rose 4.4% to 16.7 million. Those services let clients get 90-day prescriptions through the mail and use Maintenance Choice, which allows them to pick up 90-day prescriptions in CVS drugstores at the same lower price they would pay through the mail.
At the drugstores, pharmacy same-store sales rose 7.3percent, while same-store sales of general merchandise rose just 0.3%.
Bernstein analyst Helene Wolk said that while the same-store sales growth fell short of her expectations, the results were still "markedly better" than Walgreen and smaller player Rite Aid Corp.
Last week, Walgreen posted its second consecutive monthly drop in same-store sales, as January same-store sales fell 1.1%. Rite Aid's same-store sales have fallen for eight months in a row.
CVS did not give an update regarding the U.S. Federal Trade Commission's investigation into some of its business practices, which followed its acquisition of Caremark.
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