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CVS Caremark Corp. Reports Operating Results (10-Q)

August 07, 2012 | About:
10qk

10qk

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CVS Caremark Corp. (CVS) filed Quarterly Report for the period ended 2012-06-30.

Cvs Caremark Corporation has a market cap of $57.35 billion; its shares were traded at around $44.11 with a P/E ratio of 15.5 and P/S ratio of 0.5. The dividend yield of Cvs Caremark Corporation stocks is 1.5%. Cvs Caremark Corporation had an annual average earning growth of 15.7% over the past 10 years. GuruFocus rated Cvs Caremark Corporation the business predictability rank of 4-star.

Highlight of Business Operations:

Operating expenses increased $139 million, or 3.9% and $412 million, or 5.9% in the three and six months ended June 30, 2012, respectively, as compared to the prior year periods. Operating expenses as a percent of net revenues decreased approximately 145 basis points to 12.2% and 140 basis points to 12.1% in the three and six months ended June 30, 2012 as compared to 13.6% and 13.5% in the prior year periods, respectively. Operating expenses as a percentage of net revenues decreased due to expense leverage from same store sales growth and expense control initiatives. The increase in operating expense dollars in the three and six months ended June 30, 2012 was primarily due to incremental store operating costs associated with the increase in sales volume in our stores and a higher store count, as well as operating expenses associated with the UAM Medicare PDP Business we acquired on April 29, 2011.

Gross profit increased $57 million, or 8.1%, to $777 million in the three months ended June 30, 2012, as compared to the prior year period. Gross profit as a percentage of net revenues was 4.2% in the three months ended June 30, 2012, compared to 5.0% in the prior year period. Gross profit increased $43 million, or 3.2%, to $1.4 billion in the six months ended June 30, 2012, as compared to the prior year period. Gross profit as a percentage of net revenues was 3.8% in the six months ended June 30, 2012, compared to 4.8% in the prior year period. The increase in gross profit dollars was primarily due to a significant number of new client starts, an increase in generic dispensing and drug cost inflation. The decrease in gross profit as a percentage of revenue was driven primarily by client pricing compression, increased payroll and other expenses associated with our mail operations and expanding Medicare Part D operations. The increase in expenses associated with our mail operations was the result of the significant number of new client starts.

Gross profit increased $361 million, or 8.2%, to $4.8 billion in the three months ended June 30, 2012, as compared to the prior year period. Gross profit as a percentage of net revenues increased to 30.1% in the three months ended June 30, 2012, compared to 29.7% in the prior year period. The increase in gross profit dollars was primarily driven by same store sales increases. The increase in gross profit as a percentage of revenue was primarily driven by increased pharmacy margins due to the positive impact of increased generic drugs dispensed, partially offset by continued reimbursement pressure, lower front store margins and the accounting change discussed below. Front store revenues as a percentage of total revenues for the three months ended June 30, 2012 were 31.2%, as compared to 32.1% in the prior year period. Pharmacy revenues as a percentage of total revenues for the three months ended June 30, 2012 were 68.8%, compared to 67.9% in the prior year period.

Gross profit increased $786 million, or 9.2%, to $9.3 billion in the six months ended June 30, 2012, as compared to the prior year period. Gross profit as a percentage of net revenues increased to 29.3% in the six months ended June 30, 2012, compared to 29.1% in the prior year period. The increase in gross profit dollars was primarily driven by same store sales increases. The slight increase in gross profit as a percentage of revenue was primarily driven by increased pharmacy margins due to the positive impact of increased generic drugs dispensed partially offset by continued reimbursement pressure and lower front store margins. Front store revenues as a percentage of total revenues for the six months ended June 30, 2012 were 30.6%, as compared to 31.5% in the prior year period. Pharmacy revenues as a percentage of revenues for the six months ended June 30, 2012 were 69.4%, compared to 68.5% in the prior year period.

Operating expenses increased $132 million to $3.3 billion, or 20.8% as a percentage of net revenues, in the three months ended June 30, 2012, as compared to $3.2 billion, or 21.4% as a percentage of net revenues, in the prior year period. Operating expenses increased $356 million to $6.6 billion, or 20.6% as a percentage of net revenues, in the six months ended June 30, 2012, as compared to $6.2 billion, or 21.1% as a percentage of net revenues, in the prior year period. The improvement in operating expenses as a percentage of net revenues for the three and six months ended June 30, 2012 was primarily due to expense leverage from our same store sales growth and expense control initiatives.

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