Q1 Preview: CVS (CVS) May Have Prescription for Beat on Aetna Contract

CVS Caremark Corporation (NYSE: CVS) shares are lower Wednesday ahead of the company's first-quarter earnings report expected out before the market opens Thursday. The stock is down 0.3 percent at last check.

CVS is expected to report EPS of $0.55 on revenue of $25.87 billion. Last quarter, the Woonsocket, RI-based drug store chain had EPS of $0.80 on revs of $24.77 billion, both mixed versus the analyst consensus. Looking back at the first quarter of 2010, CVS posted non-GAAP EPS of $0.60 on sales of $23.76 billion, beating consensus views calling for EPS of $0.58 and revs of $24.14 billion.

Shares fell just 1.7 percent through the quarter and are up 7 percent since.

CVS shares currently trade at a P/E of 11.6x FY12 EPS estimates, compared with 14.3x at Walgreen (NYSE: WAG) and 11.4x for Wal-Mart (NYSE: WMT).

Data from Bloomberg has 17 analysts with a Buy on CVS, 10 with a Hold, and none suggesting to Sell. The analyst price target average is $38.50, with a high of $45 and low of $33. Shares have traded in a range of $37.43 - $26.84 over the last 52-weeks.

Analyst Summary

• J.P. Morgan is looking for EPS of $0.54 on revs of $26.03 billion. "Revenue growth in the PBM segment should outpace the retail segment primarily due to start of the Aetna contract on the PBM side."
  
  JPM sees sales of $14.54 billion for the retail side of the business, just a 4 percent increase from the same period last year. The firm sees comps increasing 2.8 percent. The firm expects "retail operating margins to decline by 3 bps to 7.3%, which equates to 3.7% operating profit growth (which compares to the company’s guidance for operating profit growth of 4-6% in 1Q11)."
  
  PBM scripts should be up 19.1 percent to 209 million, with EBITDA per adjusted claim of $2.27.
  
  
• Goldman Sachs is looking for EPS of $0.56 from CVS. The firm sees FY11 EPS of $2.75 on sales of $108.31 billion and FY12 EPS of $3.32 on sales of $108.71 billion. Goldman maintains a Buy rating and $40 price target into the earnings.

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of the release.

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