WOONSOCKET, R.I. (Reuters)—CVS Caremark Inc. said it had no plans to split up its retail and pharmacy benefits management businesses, and posted a higher-than-expected quarterly profit helped by strong sales at its drugstores.

The company is struggling to combat the perception that CVS and Caremark should consider undoing their 2007 merger as the Caremark PBM business has been a drag on CVS's profitability.

CVS bought Caremark for $27 billion to drastically expand its PBM business, which administers prescription drug benefits for employers and health plans and operates a large mail-order pharmacy.

In late 2009, the Caremark part of the business lost billions of dollars in contracts and the company's shares plunged. Since then, it has brought in new leadership and made other changes to try to fix the business, and the moves appear to be paying off.

In the first quarter, the PBM business beat some analysts' expectations for revenue and margin, including Andrew Weisgall at Bernstein Research and Lisa Gill at JPMorgan Chase & Co.

Management came out swinging at its critics on its quarterly conference call Thursday, trying to put to rest suggestions that the company should be broken up.

"Let me address the speculation with regards to the future direction of our company," said CEOLarry Merlo. "There are no plans to split up the company."

Profit tops expectations

First-quarter net income attributable to CVS Caremark came to $713 million, or 52 cents per share, compared with $771 million, or 55 cents per share, a year earlier.

Excluding $106 million of intangible asset amortization related to acquisition activity, the company earned 57 cents per share, beating analysts' estimates of 55 cents.

CVS, which runs one of the largest U.S. drugstore chains, said pharmacy same-store sales rose 3.7% in the quarter, reflecting a strong flu season.

The 18.4% increase in pharmacy services revenue was due mainly to the addition of a previously announced contract with Aetna Inc.

CVS affirmed its 2011 earnings forecast of $2.72 to $2.82 per share.

CVS shares were up 0.6% at $36.33 in morning trading on the New York Stock Exchange.