WOONSOCKET – CVS Caremark Corp., the largest U.S. provider of prescription drugs, in making its second quarter earnings reports, said profit will fall short of its previous forecast in 2010, citing the slumping economy.
Net income for the quarter ended June 30 totaled $821 million, a decline of 7.3 percent from the 2009 period, as revenue fell 3.5 percent to $24 billion.
The pharmacy retailer and benefit manager reported earnings per share of 61 cents, the same as last year, 7 cents below the average of analysts surveyed by Bloomberg. Revenue in the pharmacy services unit, which includes benefits management, fell 9 percent.
Operating expenses advanced about 2 percent, which CVS Caremark failed to explain adequately, said Scott Mushkin, a New York-based analyst with Jefferies & Co., which rates CVS Caremark “buy.”
“Communication continues to be an issue for CVS,” Mushkin said in an interview. “Their stock valuation is a reflection of that.”
The shares fell 92 cents to $29.68 at 9:30 a.m. in New York Stock Exchange composite trading. The company had dropped 5 percent this year before today.
Looking ahead, earnings excluding some items will be at least $2.68 a share, CVS Caremark said Wednesday. That compares with an earlier minimum of $2.77.
The pharmacy benefits division, which yesterday announced it won a 12-year contract with Aetna Inc., accounted for about half of sales last year. Consumers also are buying fewer drugs, as well as non- discretionary items, as they cope with the aftermath of the recession. Consumer confidence declined to a five-month low in July.
“Supermarkets and drugstores appear much more challenged right now than the higher-end consumer retailers,” said Joel Levington, a New York-based bond analyst with Brookfield Investments. Unemployment and housing prices remain of concern to consumers, he said.
CVS Caremark reduced its same-store sales outlook to an increase of at least 2 percent from a rise of at least 3.5 percent previously.
The agreement with Aetna, which represents about $9.5 billion in annual drug spending, probably will cut earnings by as much as 2 cents a share in 2010 because of costs to implement it, and should begin adding to profit in 2011.
