By Chris Burritt
WOONSOCKET - CVS Caremark Corp., the largest provider of prescription drugs in the U.S., reported second- quarter profit that exceeded analystsâ€™ estimates, helped by customers it gained from Walgreen Co.
Net income rose 18 percent to $966 million, or 75 cents a share, from $816 million, or 60 cents, a year earlier, the Woonsocket-based company said today in a statement. Excluding certain items, profit totaled 81 cents a share, compared with the 80-cent average estimate of analysts, according to data compiled by Bloomberg.
CVS boosted revenue 16 percent after winning customers from Walgreen, which last year ended its contract to sell prescriptions through employee benefits manager Express Scripts Holding Co. CVS reiterated today it expects to retain at least half of those customers in the fourth quarter as Walgreen and Express Scripts prepares to renew their agreement, effective Sept. 15.
â€śCVS is well positioned to keep many of its new customers,â€ť Deborah Weinswig, an analyst at Citigroup Inc. in New York, said in a note July 30. She recommends buying the shares and said â€śmanagementâ€™s expectation for at least 50 percent retention could ultimately prove conservative.â€ť
CVS rose 0.3 percent to $44.90 at the close in New York yesterday. The shares have advanced 10 percent this year through yesterday.
Express Scripts manages pharmacy benefit programs for private employers, unions and government health plans. Walgreenâ€™s dispute had revolved around reimbursement rates for 88 million prescriptions, or 10 percent of Walgreenâ€™s pharmacy business. Wal-Mart Stores Inc., CVS and Rite Aid Corp. had stepped up marketing to grab Walgreenâ€™s prescription customers amid the impasse.