NEW YORK (TheStreet) -- CVS Caremark (CVS) was rising 2.69% to $68.74 on Tuesday afternoon after the second-largest drugstore chain in the U.S. raised its first-quarter guidance despite the company's recent announcement that it would stop selling tobacco products.
CVS said that the removal of tobacco products would cost $2 billion in annual revenue, along with an earnings per share reduction of six to nine cents per share in the fiscal year 2014, according to The Associated Press. But the company also said business is healthy enough that these hits would not necessitate lower guidance; in fact, it raised its first-quarter guidance to a range of $1.03 to $1.06 per share from a range of 96 cents to 99 cents a share. This surpassed analysts' expectations of 98 cents a share, according to FactSet.
The company also posted EPS and revenue for the fourth quarter that edged analysts' expectations. Net revenues increased 4.6% to a record $32.8 billion, while adjusted EPS increased 15.8% to $1.12. Analysts had expected EPS of $1.11 on $32.67 billion in revenue.
TheStreet Ratings team rates CVS CAREMARK CORP as a "buy" with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
"We rate CVS CAREMARK CORP (CVS) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 6.7%. Since the same quarter one year prior, revenues slightly increased by 5.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 30.37% and other important driving factors, this stock has surged by 29.02% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, CVS should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- CVS CAREMARK CORP has improved earnings per share by 30.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, CVS CAREMARK CORP increased its bottom line by earning $3.03 versus $2.61 in the prior year. This year, the market expects an improvement in earnings ($3.96 versus $3.03).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Food & Staples Retailing industry average. The net income increased by 24.6% when compared to the same quarter one year prior, going from $1,006.00 million to $1,254.00 million.
- Net operating cash flow has significantly increased by 84.50% to $1,703.00 million when compared to the same quarter last year. In addition, CVS CAREMARK CORP has also vastly surpassed the industry average cash flow growth rate of -48.19%.
- You can view the full analysis from the report here: CVS Ratings Report