CVS wins in Walgreen dispute

An ongoing contract disagreement with Express Scripts is pushing business to Walgreen's rival.

By Jim J. Jubak May 2, 2012 4:14PM
CVS Caremark (CVS) reported first-quarter earnings of 65 cents a share, 2 cents above the Wall Street consensus. The company also reported a 19.9% year-to-year increase in revenue to $30.8 billion. The analyst consensus called for $30.29 billion in revenue.

More importantly, in the current profit-taking-prone market, the company raised guidance for the second quarter to earnings per share of 78 cents to 80 cents versus the current 74 cents a share analyst estimate. 

For all of 2012, the company forecast earnings of $3.23 to $3.33 a share. That's a big increase from prior guidance of $3.18 to $3.28 a share. The Wall Street consensus was $3.29 a share for 2012.

On the higher guidance, I'm raising my target price for these shares to $53 a share from my previous target of $48 by October. (CVS Caremark is a member of my Jubak's Picks 12-18

The shares rose nearly 3% to $46 in late trading Wednesday.

So where did the extra earnings (and the improved guidance) come from?

CVS Caremark's pharmacy-benefits-management unit continues to pick up business from Walgreen (WAG) as a result of that company's contract dispute with pharmacy-benefits manager Express Scripts Holding (ESRX). In the second quarter, CVS Caremark expects to pick up another 3 cents to 4 cents a share from that dispute. In the first quarter, revenue at that unit grew by 32% to $18.3 billion.

At the company's retail drug store unit, revenue climbed by 9.9% to $16 billion. Same-store sales were up by 8.4% from the first quarter of 2011. Same-store sales would have climbed even more except for higher sales of recently introduced generics with lower prices.

The company's newest business, its in-store MinuteClinic health-care centers, grew revenue by 22% in the quarter.

In the quarter, CVS Caremark generated $2.4 billion in free cash flow. The shares pay a dividend of 1.4%.

At the time of this writing, Jim Jubak didn't own shares of any companies mentioned in this post in personal portfolios. The mutual fund he manages, Jubak Global Equity Fund (JUBAX), may or may not own positions in any stock mentioned. The fund did own shares of CVS Caremark as of the end of December. For a full list of the stocks in the fund as of the end of the most recent quarter, see the fund's portfolio here. 
17Comments
May 11, 2012 12:44PM
avatar
I will still go to Walgreens.    CVS has the worst service.   The people that fill the prescriptions are very rude and obnoxious.   I used their RX mail service for a while.   I was on Autofill.   They would refill the prescriptions too early, then they would yell at me for getting it refilled too soon.   I will never do business with them again.   Also, their stores are filthy.   
May 11, 2012 12:43PM
avatar
I will still go to Walgreens.    CVS has the worst service.   The people that fill the prescriptions are very rude and obnoxious.   I used their RX mail service for a while.   I was on Autofill.   They would refill the prescriptions too early, then they would yell at me for getting it refilled too soon.   I will never do business with them again.   Also, their stores are filthy.   
May 3, 2012 11:12PM
avatar
CVS is horrible in Los Angeles. Filthy stores and rude clerks insult customers. I refuse to enter their stores. RiteAid isn't much better.
May 3, 2012 5:28PM
avatar
A PLAGUE ON BOTH THEIR HOUSES. I USE WALMART THEY ARE CHEAPER AND HAVE HUNDREDS OF GENERICS AT 30 DAY $4 OR 90 DAY AT TEN DOLLARS. THEY ALSO ACCEPT MOST INSURANCE. tARGET IS ANOTHER CHOICE. tHEY ALSO HAVE THEIR OWN BRAND HEALTH AND BEAUTY AIDS USUALLY AT MUCH LOWER PRICING. ALSO CLUBS ARE A BETTER FOR DRUGS OR OTHER PRODUCTS
May 3, 2012 3:25PM
avatar

I will never deal with Express Scripts-this company harrassed me for over a year!  First my mailbox started filling up with their crap-I threw it away. Then the phone calls started, day and night. I tried politely telling them I wasn't interested, but they wouldn't stop! I told them leave me alone, I don't want to do business with you, stop calling and stop filling my mailbox up with your crap. I finally told them that if they didn't stop I would be contacting the FTC, my state attorney general, and a lawyer-and they finally stopped. Those people are nuts. And bullies.  As for Walgreens, we have two stores locally; the folks that work there are friendly and helpful, the store is always clean, and I shop there often.

May 3, 2012 3:17PM
avatar
The CVS I go to in Michigan is great. The store is clean, they are never short staffed ( not when I've been there), the pharmacy is efficient, and everyone is always friendly. I used to go to Walgreens - after trying multiple locations I got fed up with pharmacy employees whose English was so broken I couldn't understand what was being said to me nor could they understand me, which resulted in my getting incorrect prescription refills twice. Trying to get them corrected was a nightmare and costly as I was charged a new co-pay for the scripts both times with no refund for Walgreens error. The insurance plan CVS offers works with my prescription coverage - if my employer sponsored co-pay is more than $10 they put it on the Caremark plan for $10.
May 3, 2012 12:23PM
avatar

I now pay for prescriptions out of pocket, but I changed from CVS to Walgreens when I had prescription coverage and there was a shortage on a drug I was taking (Armour Thyroid).  The script was originally at CVS who gave me 3 tablets and told me they had no more. How about your other stores? A shrug was my response.  I called Rite Aid and a number ofd different local pharmacies and was told they couldn't get my drug.  When I called Walgreens, two pharmacists really went out of thier way to work with me. I asked if two synthetic drugs could be prescribed to take the place of my Armour.  They said yes and I went back to my doc and he wrote the two scripts. Walgreens was not participating with my insurance, so it was going to have to be out of pocket. I couldn have gone back to any of the other pharmacies but I asked myself why I should give the other pharmacies my business when they did absolutely nothing to help me.  So I stayed with Walgreens, signing up for this $25 a year prescription program. My daughter ended up getting the same two scripts from Rite Aid and was paying more-- with insurance!  Anyway, now I'm unemployed and still getting my scripts from Walgreens, even though Armour is back in supply.  The servie at Walgreens is better than great, the stores are clean, and their extended hours are convenient.  Not to mention that everyone who works there must like their jobs because they always are friendly and welcoming.

May 3, 2012 10:56AM
avatar
CVS in the Las Vegas areas are usually dirty, understaffed and some of their pharmacists play tricks with prescriptions like when you ask for a 120 day supply of generic, they end up giving you a 30 day supply and tell you that their supply is low. Too many times  I can stand in a line for twenty minutes, due to the fact they only had one cashier, and other workers walk around doing stock.  One would think if they are interested in customer service they would train the associates to expediate when lines are long.  The poor cashier had to deal with the crowd abuse, who were angry in waiting.  I am surprised people just did not walk out the door with merchandise in retaliation for such long lines.  Walgreens does indeed do a better job all around from a customers perspective. The silly surveys CVS asks you to take, requires more time then the dumb coupon they offer for taking the survey.  It will be a matter of time when Walgreens takes on CVS in all areas.
May 3, 2012 10:42AM
avatar

Government insurance requires CVS to fill prescriptions.

 

May 2, 2012 8:31PM
avatar
I went into a CVS once and found it to be dirty looking.  Never went back again.  I'll stick to Walgreens.
May 2, 2012 6:40PM
avatar
i worked at cvs and they ALWAYS made an issue of customer service.  they cut back hours, don't have enough tech help, but they make an issue of customer service.  i laugh at the television ads where they have a "customer" with a "pharmacist" outside the store, raving about the RPh and customer service.  they only time a pharmacist is allowed out of the store is reporting in for or finishing his shift.  by law, they cannot dispense any scripts without an RPh in the pharmacy.  what a joke cvs has become.  this is a case of bigger not being better.
May 2, 2012 6:18PM
avatar
It's really too bad that CVS has out-bid Walgreens for Express Scripts.  They out-bid Walgreens for my insurance as well.  Walgreens has far superior service and merchandise.  And CVS frankly  is awful.  I've been to CVS in New York as well as here at home and the lack of service is appalling. In New York I dropped off a prescription for my daughter.  It took an hour to drop a prescription off.  That's pathetic.  My father used to own his own drug store and customer service was the most important thing in his business.  And he was right.  The only thing I go to CVS for is  prescriptions.  I refuse to shop there for anything else.  One can only hope that after Express Scripts drops the price they are willing to pay, that CVS will lose the contract.  The reason they won it in the first place is because Walgreens  wouldn't go for the ridulously low  price Express Scripts was offering.  So Express Scripts went to CVS and gave them a better deal.  Wait until next year.  I hope they go bankrupt.    
May 2, 2012 5:56PM
avatar
They very well may be the worst in customer service, but it you ask the executives they will tell you they have great customer service. This is rated on a store by store basis by surveys that should be given to assoicates. However, the stores are coached on keeping them and rating themselves. The store managers are threatened to be fired if they don't get a good customer service score. This has been brought up to Larry Merlo previously and he doesn't want to know about the cheating. Just get the results!
May 2, 2012 5:49PM
avatar
TO: JODY 41

Odd, that was my problem for years with Walgreen: Where do I go NOW ?

May 2, 2012 5:37PM
avatar
My company uses CVS caremark for our prescription program. I recently had two prescriptions filled at CVS pharmacy. First the insurance deducted a little over 10.00 for over charging, and then 45.00 due to co payment since was a brand name..I believe CVS Caremark has an obligation to inform the patient if there's a generic brand (in this case there was) and also should not overcharge the patient. Bottom line, out of over 74.00 for the two prescriptions, CVS Caremark paid 11.00..not even worth me paying premiums for such lousy insurance
May 2, 2012 5:20PM
avatar
I have had a few issues at CVS but that was because of our insurance or that the Dr did not call in the medicine, CVS will work with you on your medicine, if you run out and you need them they will let you have them and then deduct it from your re fill. I hope that CVS continues to do good, Walgreens is so expensive it is unreal the discount that you can get at CVS compare to Walgreens and I used to shop at Walgreens all the time, but they will not help you with your medicine at all like CVS will. and they will try every angle to get you the best discount for your medicine. 
May 2, 2012 4:57PM
avatar

CVS is the worst for customer service. Your oder is ready, you get there & have to wait a hour, because it ISN"T ready.  I have been shorted pills,told they will only give ones they have in stock,If they are out of any med. you have to wait a week(they only get stock once a week). I only go to CVS because of our insurance (changeing this in Nov,), The closest one is 24 miles away.  Walgreens is 1/2 a mile from my house,orders are always ready, they receive orders daily. I buy alot of things from Walgreens. Cvs only the meds. I can't get from Walgreens.

Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

122
122 rated 1
288
288 rated 2
472
472 rated 3
638
638 rated 4
628
628 rated 5
704
704 rated 6
609
609 rated 7
489
489 rated 8
275
275 rated 9
129
129 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
AAPLAPPLE Inc10
ATVIACTIVISION BLIZZARD Inc10
CTSHCOGNIZANT TECHNOLOGY SOLUTIONS10
FOXATWENTY-FIRST CENTURY FOX Inc CLASS A10
ITUBITAU UNIBANCO BANCO MULTIPLO S.A.10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.