The retail pharmacy sector had an excellent first quarter across the board. These outfits offer investors a safe harbor in the choppy water of the overdue economic recovery. This article will focus on the three key players: Walgreen Company (NYSE:WAG), Express Scripts Holding Company (NASDAQ:ESRX) and my personal choice, CVS Caremark Corporation (NYSE:CVS). All three reported strong sales, and the share price of each saw solid gains in the first quarter.
Walgreen Remains the Leader
Walgreen Company (NYSE:WAG) runs the largest network of retail drugstores in the U.S. The outfit offers an array of consumer goods and services, pharmacy, and health and wellness services. Walgreen has a market cap of $45.5 billion and a P/E ratio of 21.4 – above the S&P 500 P/E ratio of 17.7. Shares are up by more than 29% so far in 2013.
The drug chain is strong in a number of areas including climbing net income, steady cash flows, and a sound financial position overall. Moreover, Walgreen Company (NYSE:WAG) has a history of solid share price performance and continued growth in earnings per share.
The company recently reported results for the first quarter and sales are up about 3.8% to just under $6 billion. Walgreens’ total pharmacy sales accounted for much this rise – more than 64% of total sales. But total front-end sales declined 2.9% compared with the first quarter of 2012.
In short, Walgreen Company (NYSE:WAG)’s prescription drug sales have climbed for two straight months and are likely to continue. The share price is now hovering at $49+, far higher than the 52 week low of $28.50. At this price, it could be time to take some money off the table; but growing Rx sales numbers going forward make Walgreen a good long-term buy.
Express Scripts Delivers
Express Scripts Holding Company (NASDAQ:ESRX) is the leading pharmacy benefit manager (PBM) is the sector. In this capacity the company operates as a third-party administer of employee drug plans. In fact, almost 100 million members receive their prescriptions from an Express Script’s managed plan.
This makes the prescription provider the largest PBM – way ahead of CVS Caremark Corporation (NYSE:CVS). Express Scripts also has a large share of the Medicare prescription market. The outfit’s business model aims to cut out of pocket cost of Rx drugs for its members – this ultimately creates solid margins.
The share price is currently hovering at the $61 mark, and this is still lower than the 52 week high of about $66. Express Scripts has a market cap of $48.7 billion and a P/E ratio of 35.3, above the S&P 500 P/E ratio of 17.7. But with shares up about 10% in 2013, this presents a buying opportunity as many analysts have noted.
In sum, as with the other PBM key players, Express Scripts Holding Company (NASDAQ:ESRX) is strong because of its solid revenue growth, continued gains in net income along with good cash flow – all of which contribute to ongoing growth in earnings per share. Express Scripts solid financial position makes the company a good buy for Rx investors.
CVS Caremark Earnings Pumped by Generic Drugs
CVS Caremark Corporation (NYSE:CVS) also recently announced good news for the first quarter: quarterly earnings rose 23% despite flat revenue. The earnings growth is due mostly to strong demand for new generic drugs. The big news is that CVS Caremark Corporation (NYSE:CVS) has reported solid earnings – in fact, better than expected – for five straight quarters. And the growth in earnings stems mostly from climbing Rx volumes.