Drugstore chain CVS Caremark Corp. has seen its sales rise with rival Walgreen Co.'s loss of a large client, and that trend may help CVS's first-quarter results.
WHAT TO WATCH FOR: CVS Caremark, based in Woonsocket, R.I., said in February that when Walgreen's contract with pharmacy benefits manager Express Scripts Inc. ran out, more customers switched to CVS pharmacies than it expected. That boon prompted the smaller chain to raise its 2012 earnings forecast.
Walgreen stopped filling prescriptions for Express Scripts at the end of 2011. Analyst Deborah L. Weinswig with Citigroup expects former Walgreen customers to help CVS post strong, first-quarter growth at stores open at least a year. And she expects to see sales rose for CVS's own pharmacy benefits manager, or PBM.
Revenue from that side of CVS jumped 32 percent to $15.9 billion in last year's fourth quarter, compared with a year earlier, as CVS Caremark added a long-term contract with health insurer Aetna Inc. and integrated insurer Universal American Corp.'s Medicare prescription drug business.
WHY IT MATTERS: CVS Caremark runs the second-largest chain of drugstores in the U.S. after Walgreen. It operated 7,327 drugstores at the end of last year. Its Caremark unit is one of the nation's largest PBMs. PBMs run prescription drug plans and use their large purchasing power to negotiate lower drug prices.
WHAT'S EXPECTED: Analysts surveyed by FactSet expect, on average, earnings of 63 cents per share on $30.3 billion in revenue.
LAST YEAR'S QUARTER: CVS Caremark's net income fell nearly 8 percent as its PBM to reported lower profits. The company earned $713 million, or 52 cents per share, as revenue grew 9 percent to $25.88 billion.
But company officials said they expected Caremark's results to improve in 2012 as a wave of profitable and low-cost generic drugs arrives on the market.