December 18, 2013 / 1:31 PM / 6 years ago

CVS expects 2014 sales gain despite Obamacare

NEW YORK (Reuters) - CVS Caremark Corp (CVS.N) said on Wednesday that it expected sales and earnings to rise in 2014 despite only a “modest” benefit next year from the launch of Obamacare and a ban preventing it from marketing to some Medicare patients.

A CVS pharmacy is seen in New York City July 28, 2010. REUTERS/Mike Segar

The company said at its analyst day in New York that it expects revenue to rise between 4 percent and 5.25 percent next year, with big gains in its pharmacy benefits management business mitigating softer growth at its drugstores.

CVS also raised its dividend and unveiled a new $6 billion stock-buyback program, and its shares rose 2.3 percent to $68.35 in midday trading.

Enrollment in Obamacare, formally known as the Affordable Care Act and designed to increase the number of Americans with medical insurance, has been impeded by problems with the government’s web site.

But longer term, CVS sees a big opportunity in a program that could insure another 30 million Americans and bring more customers into its stores and pharmacies.

“It’s going to be bumpy. There’s no doubt about that,” Chief Financial Officer Dave Denton told Reuters on the sidelines of the meeting. “We do believe this will get worked out.”


Another roadblock for CVS is a marketing ban imposed earlier in the year by the Centers for Medicare and Medicaid Services, preventing it from enrolling patients in SilverScript, the Medicare Part D prescription drug plans that CVS offers to seniors.

Denton told analysts that CVS has told the Centers for Medicare and Medicaid Services that it has fixed the problem and expects the ban to be lifted in early 2014.

The federal agency’s ban on some Medicare Part D plan activity arose in January after CVS converted to a new enrollment system, which led to service problems, such as an increase in calls and problems in processing claims. In some instances, patient claims could not be processed at pharmacies.

CVS expects same-store sales to be up 0.75 percent to 2 percent in 2014. But an increase in generic drugs, which sell for less but are far more profitable, will help the retail unit’s profit.

Its pharmacy benefit management unit, which competes with Express Scripts Holding Co ESRX.O, should record a revenue rise between 7.25 percent and 8.5 percent in 2014, CVS said.

According to the company, CVS has held on to about 60 percent of the business it won away from Walgreen in 2012 when for months, its rival stopped filling prescriptions for Express Scripts members, who went to chains like CVS and Rite Aid Corp (RAD.N) instead. Walgreen and Express Scripts ended their fight in July 2012.

CVS, which operates the No. 2 U.S. drugstore chain after Walgreen Co WAG.N, expects adjusted earnings to rise to a range of $4.36 to $4.50 per share in 2014, while analysts on average were projecting a profit of $4.47, according to Thomson Reuters I/B/E/S.

The company said its board had approved a 22 percent increase in the quarterly dividend, bringing it up to 27.5 cents per share.

CVS said it expected its adjusted earnings per share from continuing operations for 2013 to come in at the high end of the $3.94-to-$3.97 range it gave last month.

Reporting by Phil Wahba in New York; Editing by Lisa Von Ahn and Jan Paschal

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