Shares of CVS Caremark Corp. continued climbing Friday, a day after it delivered a 2013 forecast and announced a dividend increase that left analysts raving about growth prospects for the drugstore chain and pharmacy benefits manager.
THE SPARK: The Woonsocket, R.I., company said it expects adjusted earnings per share next year to range between $3.84 and $3.98 in 2013. That forecast assumes $4 billion in share repurchases next year, but it doesn't include expected gains from a recent debt tender and refinancing.
That topped average analyst expectations of about $3.79 per share, according to FactSet.
The company also said it was raising its quarterly cash dividend by more than 6 cents, or 38 percent, to 22.5 cents. The dividend is payable Feb. 4 to shareholders of record on Jan. 24.
THE BIG PICTURE: CVS Caremark runs the second-largest chain of drugstores in the United States, after Walgreen Co. It has more than 7,400 locations. Its Caremark unit also is one of the nation's largest pharmacy benefits managers.
Pharmacy benefits managers, or PBMs, run prescription drug plans for employers, insurers and other customers. They process mail-order prescriptions and handle bills for prescriptions filled at retail pharmacies. They use large purchasing power to negotiate lower drug prices and make money by reducing costs for health plan sponsors and members.
THE ANALYSIS: The company "lit up the room" at its investor day presentation with a bright outlook and plans to create more value for shareholders, BMO Capital analyst Dave Shove said in a research note, referring to the share repurchase plan and dividend increase.
Credit Suisse analyst Edward J. Kelly raised his price target on the stock to $55 from $50. He wrote in separate research note that the company's 2013 guidance was surprising, and it fueled a story that looked like it was "running out of gas in 2013."
Jefferies analyst Scott A. Mushkin said in another note he was "strongly reiterating" his "Buy" rating on the stock. He said implementation of the health care overhaul could lead to more customers and higher-than-expected earnings per share growth for the company.
"While there remains a tremendous amount of uncertainty around the implications of (the overhaul), what is becoming increasingly evident to us is that CVS Caremark has the potential to capture greater market share and see a jump in covered lives," the analyst wrote.
SHARE ACTION: Up 85 cents to $49.35 in Friday afternoon trading, while the Standard & Poor's 500 index dropped slightly. The stock has climbed 21 percent so far this year.