Caremark Quarter Looks Good

Earnings rise 16% and top estimates.
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first-quarter earnings jumped 16% from a year ago, reflecting higher margins and a growing sales contribution from the benefit-manager's mail pharmacy.

Caremark earned $228.8 million, or 51 cents a share, in the quarter, compared with $197.5 million, or 43 cents a share, a year ago. Analysts surveyed by Thomson First Call had been forecasting earnings of 50 cents a share in the most recent quarter.

First-quarter sales rose 7% from last year to $8.91 billion, beating the $8.67 billion consensus forecast. By segment, mail pharmacy revenue rose 11% from last year to $3.1 billion, reflecting a 5% rise in claims to 15.1 million. Retail revenue rose 4% to $5.7 billion, as retail prescription volume fell 10% to 117.2 million claims.

Caremark's gross margin was 6% in the first quarter, roughly 25 basis points higher than last year. The company's selling, general and administrative expense was $129.6 million, up 13%, primarily because of a higher share-based compensation expense and costs associated with the Medicare Part D program.

"Our first-quarter financial performance represents a good start to the year with growth in both mail service and retail revenue," the company said. "Caremark has emerged as a significant participant in the Medicare Part D program. Combined enrollment in SilverScript, our national PDP, and through our health plan clients places us among the 10 largest Prescription Drug Plans. We have made a significant investment in the Medicare Prescription Drug Program and as a result, we have one of the broadest offerings in the business."

Caremark expects to earn 54 cents or 55 cents a share, including stock options expense, in the second quarter; analysts were forecasting 55 cents a share, according to Thomson First Call. For the year, Caremark sees earnings of $2.29 to $2.35 a share, including options; the consensus is $2.30 a share.