* CVS buys Brazil's Drogaria Onofre; terms not disclosed
* Profit of $1.14/share excluding items vs Street view $1.10
* 2013 forecast raised due to late 2012 refinancing
* Shares up 0.3 percent after modest decline in early
By Jessica Wohl
Feb 6 CVS Caremark Corp posted a
bigger-than-anticipated rise in fourth-quarter profit on
Wednesday, helped by growth at both its pharmacy services
business and its CVS drugstore chain, and made its first
international push by buying a Brazilian retailer.
CVS Caremark said it bought Drogaria Onofre, Brazil's
eighth-largest drugstore chain by sales, last week. The move
comes months after larger U.S. drugstore rival Walgreen Co
stepped out of the United States for the first time when
it bought a 45 percent stake in Europe's Alliance Boots
, with the option to purchase the rest of it in about
Drogaria Onofre, with 44 stores in Brazil, is a small
international start for CVS, which has more than 7,400 U.S.
"It's a toe in the water; it's not financially material to
our numbers this year," CVS Chief Executive Officer Larry Merlo
CVS did not disclose terms of the Drogaria Onofre deal.
Walgreen paid Alliance Boots $7.02 billion in cash and stock for
its stake when that deal closed in August.
CVS also raised its 2013 profit forecast by 2 cents per
share due to a debt tender and refinancing executed at the end
The company's shares were up 0.3 percent at $51.85 after
slipping to $51.40 in early trading.
GROWTH IN BOTH UNITS
CVS Caremark was formed when drugstore chain CVS bought the
Caremark pharmacy benefits management business in 2007 in a $27
billion stock deal. The company faced scorn from some industry
watchers years ago for its combined model of running drugstores
and a PBM.
Lately, though, CVS has been putting more pressure on rivals
that operate in a limited part of the sector, such as Express
Scripts Holding Co and Walgreen.
CVS said it expects to continue to retain at least 60
percent of the prescriptions it gained during a now-resolved
impasse between Walgreen and Express Scripts.
CVS earned $1.13 billion, or 90 cents per share, in the
fourth quarter, up from $1.06 billion, or 81 cents per share, a
Excluding a loss from early extinguishment of debt, the
profit of $1.14 per share topped the analysts' average forecast
of $1.10, according to Thomson Reuters I/B/E/S.
About 3 cents per share of the profit stemmed from a lower
effective tax rate and from having fewer shares outstanding than
originally anticipated, CVS said.
Revenue rose 10.9 percent to $31.39 billion, topping the
analysts' average estimate of $31.13 billion.
The quarter was "solid," but the stock is fairly valued at
13 times next year's earnings due to expectations for moderately
slower trends in 2013 due to Walgreen's efforts to win back
market share and a potentially more competitive PBM selling
season, said SunTrust Robinson Humphrey analyst David Magee.
Revenue in the PBM unit, which administers drug benefits for
employers and health plans and runs a large mail order pharmacy,
rose 17.4 percent to $18.64 billion.
Revenue in the retail division rose 5.1 percent to $16.28
billion, with sales at drugstores open at least a year up 4
The retail business had a bit of a lift in the fourth
quarter, and more in the first quarter, from a flu season that
has been significantly stronger than a year earlier, bringing
people into stores for everything from flu shots to medicine.
Still, while the first quarter is tracking to the high end
of the company's December forecast, it would be premature to
adjust the outlook based on the flu season at this point, Merlo
The company still expects to earn 77 cents to 80 cents per
share before items in the first quarter, it said. Analysts are
looking for a profit of 79 cents per share.
CVS said it expects earnings per share of $3.86 to $4.00
this year before special items, up from the December forecast of
$3.84 to $3.98. The analysts' current estimate is $3.94.