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The Zacks Analyst Blog Highlights: CVS Caremark, Walgreen, Express Scripts Holding, General Motors and Ford Motor

Zacks Equity Research

For Immediate Release

Chicago, IL – December 17, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include CVS Caremark Corporation (CVS), Walgreen Inc. (WAG), Express Scripts Holding Co. (ESRX), General Motors Company (GM) and Ford Motor Co. (F).

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Here are highlights from Friday’s Analyst Blog:

CVS Provides Impressive Outlook

CVS Caremark Corporation (CVS), one of the largest domestic integrated pharmacy services providers, recently updated its fiscal 2013 outlook and highlighted its growth framework, while reiterating its earlier guidance for the current year.

2013 Outlook

For fiscal 2013, the company expects earnings per share (EPS) of $3.59−$3.73 with adjusted EPS of $3.84−$3.98, representing annualized growth of 13%−17%. The current Zacks Consensus Estimate of $3.78 falls below the adjusted EPS guided range. The company also expects free cash flow to remain at an encouraging level of $4.8 billion– $5.1 billion with cash from operations of $6.4 billion−$6.6 billion.

CVS noted that the fiscal 2013 guidance excludes the anticipated benefit from the company's recent debt tender and refinancing, which is expected to result in an annual EPS accretion of approximately 2 cents due to the reduction of the interest expense. 

Further, CVS continued with its plan to deploy capital to boost shareholder confidence via dividends and share repurchases. The company expects to buy back shares worth $4 billion in fiscal 2013.  Additionally, its board of directors has approved a 38% increase in quarterly dividend to 22.5 cents per share, payable February 4, 2013. This hike will bring the payout ratio to 25%, the low end of its targeted range of 25%–30%, which will likely be achieved in another three years.

Reiterates 2012 Outlook

Anticipating a benefit from the company’s accelerated share repurchase program (announced in September 2012) and its expectation of retaining at least 60% of the prescriptions gained from the Walgreen Inc. (WAG) and Express Scripts Holding Co. (ESRX) impasse, CVS expects adjusted EPS in fiscal 2012 to remain in the range of $3.38−$3.41. The current Zacks Consensus Estimate of $3.37 falls below the guidance range.

The company also reiterated its 2012 free cash flow and cash flow from operations guidance of $4.6–$4.9 billion and $6.2–$6.4 billion, respectively. The fiscal 2012 guidance includes the completion of the accelerated share repurchase agreement of $1.2 billion.

Obamacare: A Big Boost

While discussing the long-term growth trajectory, CVS expected the implementation of the Affordable Care Act (:ACA) or Obamacare to play in favor of the company by providing the much needed impetus to its business. CVS is upbeat regarding the fact that under the ACA, beginning 2014, there will be an additional 30 million people to join in the list of insured people. The company believes that with this massive increase in the insured aging population, there will be a huge demand for specialty drugs, which could present a big opportunity for companies like CVS.

We are impressed with the company’s fiscal 2013 guidance, which remained above our expectation. We are also confident about CVS’ long-term potential, based on its retail execution, deployment potential and the strong generics cycle. Moreover, we believe that the healthcare reform will open up new opportunities for the company. Currently, CVS retains a Zacks #3 Rank (short-term Hold). Over the long term, we have a Neutral recommendation on the stock.

New Trucks from General Motors

General Motors Company (GM) has recently introduced the upgraded version of Chevrolet Silverado and GMC Sierra at Pontiac. The new vehicle is expected to hit the market in the second quarter of 2013.

The truck market is witnessing growth after five years of stagnation. The company expects the new 2014 trucks, which were last revamped in 2007, to boost its results. In addition, recovery of the housing industry and rising demand for replacement of the aging vehicles will have favorable impacts on the company’s performance.

These new trucks will also help General Motors to withstand stiff competition from trucks manufactured by Ford Motor Co. (F) and Chrysler. Given its light weight, which is around 200 pounds lighter than trucks of the competitors, the vehicle will provide better gas mileage.

The new trucks from General Motors features updated steering, suspension and brakes together with an aggressive look. It comes with three different engines including a 262-horsepower, 4.3-liter V6 engine, a 325-horsepower, 5.3-liter V8 engine and a 376-horsepower, 6.2-liter V8 engine.

General Motors posted a 9.7% decline in its earnings (excluding special items) to 93 cents per share in the third quarter of 2012 from $1.03 in the corresponding quarter a year ago. However, the results outpaced the Zacks Consensus Estimate of 61 cents.

Profit ebbed 5.9% to $1.6 billion from $1.7 billion a year ago due to lower profits from North America and higher loss in Europe. Revenues grew 2.5% year over year to $37.6 billion, surpassing the Zacks Consensus Estimate of $36.3 billion. The improvement was driven by an increase in worldwide sales volume to 2.3 million units.

Detroit, Michigan-based General Motors is the largest automobile manufacturer in the world and one of the ‘Big Three’ U.S. automakers. The company's significant exposure to troubled Europe has adversely affected its operations in the continent.

Currently, General Motors retains a Zacks #3 Rank, which translates into a short-term Hold rating. We have a long-term Neutral recommendation on the stock.

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Read the analyst report on CVS

Read the analyst report on WAG

Read the analyst report on ESRX

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