CVS Caremark Corp. will give investors an update on how much Walgreen business it is still hanging onto when the drugstore chain and pharmacy benefits manager reports first quarter results Wednesday.
WHAT TO WATCH FOR: Deerfield, Ill.-based Walgreen fills prescriptions for St. Louis-based Express Scripts, which runs drug plans for employers, insurers and other customers as a pharmacy benefits manager, or PBM. The companies resumed doing business last September after a break of several months. During that break, many Walgreen customers migrated to CVS stores because they needed a new place to fill prescriptions.
CVS Caremark has made retaining those customers a top priority. It estimates that it gained more than 5 million prescriptions from the split, and it has said it expects to keep at least 60 percent of that this year.
CVS Caremark also has made a priority of adding MinuteClinics to its stores. The company has more than 600 in-store clinics, which help customers with an array of relatively minor conditions like sinus infections or bronchitis. It plans to have nearly 800 by the end of this year and 1,500 nationwide by 2017.
The company also is growing through its Caremark business, which has seen a revenue bump from adding large clients like home improvement retailer Lowe's Cos.
Generic drugs have countered some of that topline growth.
Blockbuster medicines like the cholesterol fighter Lipitor have lost U.S. patent protection from generic competition in recent years, and the onset of cheaper generics hurts pharmacy revenue because they cost less than brand-name products. But generics also help profitability because they provide a wider margin between the cost for the pharmacy to purchase the drugs and the reimbursement received.
CVS said in February that it had purchased a 44-store Brazilian pharmacy chain, as it made its first foray into the international drugstore business. Analysts will be looking for an update on that deal and its impact on the company.
CVS Caremark said in February that it expects 2013 adjusted earnings to range between $3.86 and $4 per share.
WHY IT MATTERS: CVS Caremark ranks 18th on the 2012 Fortune 500 list of biggest U.S. companies based on annual revenue. With more than 7,400 drugstores, the company runs the second-largest chain in the United States after Walgreen. Its Caremark unit also is one of the nation's largest PBMs.
WHAT'S EXPECTED: Analysts expect, on average, earnings of 79 cents per share on about $30.37 billion in revenue, according to FactSet.
LAST YEAR'S QUARTER: The Walgreen-Express Scripts split helped push CVS Caremark earnings up 9 percent in last year's first quarter. CVS CEO Larry Merlo estimated that the split added about 5.7 million to 6.5 million additional prescriptions.
Overall, the company earned $776 million, or 59 cents per share, as revenue climbed 20 percent to $30.8 billion.