This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Prognosis for CVS Is Premature

NEW YORK ( TheStreet) -- CVS (CVS - Get Report) reported stellar earnings Tuesday, with a question as craggy as Maine's coast: Can they keep it up?

Granted, that's always the concern at hand when a company reports solid earnings, as CVS did with earnings up 18% and revenue up 16%, both exceeding expectations.

But there's a caveat here.

Arch rival Walgreen (WAG) got into a contract dispute with Express Scripts (ESRX - Get Report), which spelled temporary opportunity for CVS. The qualifier "temporary" is important because Walgreen and Express Script settled their quarrel.

With the dispute put to bed, though, CVS says they will retain at least 50% of those customers formerly loyal to Walgreen. That seems a touch high, but what are their chances? What's their plan?

Forbes and other media outlets, unfortunately, don't ask. They merely take CVS' claims as an article of faith -- which isn't good. Forbes' headline for example, assumes an ongoing cookbook-style formula for success. Just add water to those Walgreen customers and mix: "CVS' Prescription For Success: Record Sales, New Customers From Express Scripts Spat."

Forbes eventually addresses the fact that the spat is settled, but dismisses outright the impact it might have on CVS. "That CVS expects to retain half of the customers should ease investors' worries about whether the boost would be short-lived," Forbes wrote.

If only life were that simple: A company says what it expects and that forever quells investor concerns.

Instead of referring to a CVS "prescription" in their headline, The Wall Street Journal mentions their "confidence," more subjective and possibly fleeting. The Journal then, rightly, talks about CVS's retention plan: a predictable grab bag of advertising and promotion that CVS's management trumpeted, before throwing down an appropriate line of caution: "The market isn't quite buying all that bullishness."

That's better. CVS did well. But they still have to prove that those customers won't return to Walgreen in droves.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.

Marek Fuchs was a stockbroker for Shearson Lehman Brothers and a money manager before becoming a journalist who wrote The New York Times' "County Lines" column for six years. He also did back-up beat coverage of The New York Knicks for the paper's Sports section for two seasons and covered other professional and collegiate sports. He has contributed frequently to many of the Times' other sections, including National, Metro, Escapes, Style, Real Estate, Arts & Leisure, Travel, Money & Business, Circuits and the Op-Ed Page.

For his "Business Press Maven" column on how business and finance are covered by the media, Fuchs was named best business journalist critic in the nation by the Talking Biz website at The University of North Carolina School of Journalism and Mass Communication. Fuchs is a frequent speaker on the business media, in venues ranging from National Public Radio to the annual conference of the Society of American Business Editors and Writers.

Fuchs appreciates your feedback; click here to send him an email.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
WAG $81.65 2.05%
CVS $100.39 0.00%
ESRX $85.55 0.00%
AAPL $124.75 0.00%
FB $80.78 0.00%

Markets

DOW 17,826.30 -279.47 -1.54%
S&P 500 2,081.18 -23.81 -1.13%
NASDAQ 4,931.8150 -75.9760 -1.52%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs