Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

CVS Caremark Corporation (CVS), Walgreen Company (WAG), Rite Aid Corporation (RAD): This Drug Store Can Make You Money

The drug store industry is changing, and while it’s not all for the best, profitability is likely to improve for one simple reason.

CVS continues to impress
While Walgreen Company (NYSE:WAG) and Rite Aid Corporation (NYSE:RAD) saw revenues decline in 2012, CVS Caremark Corporation (NYSE:CVS) didn’t skip a beat. Here’s revenue (in millions) for CVS over the past five years:

  • 2008: $87,472
  • 2009: $98,729
  • 2010: $96,413
  • 2011: $107,100
  • 2012: $123,133

In the second quarter, CVS Caremark Corporation (NYSE:CVS) saw net revenue increase 1.7% year over year. This had a lot to do with volume growth in the Pharmacy Services segment (2%). The Pharmacy Services segment caters to employers, insurance companies, unions, government employee groups, and more. Based on industry trends, it was expected that CVS Caremark Corporation (NYSE:CVS) would show a boost in earnings, and that held true, with CVS reporting adjusted EPS of $0.97, a 19.5% jump year over year.

CVS Caremark Corporation (NYSE:CVS)

The Retail Pharmacy also performed well, with revenue improving 1.9%. Prescription volumes moved higher by 0.4%. Also as expected, pharmacy comps improved (0.4%), whereas front-end sales dropped (0.4%). The front-end simply refers to the front of the store, where everyday products are sold, including snacks, beauty products, books, and toys. The drug stores haven’t been performing well in this area due to increased competition from other drug stores, dollar stores, and other discount retailers.

A forward-looking tailwind is that baby boomers are beginning to retire in droves. As this massive generation ages, they will need more drugs to care for various conditions, which bodes well for CVS Caremark Corporation (NYSE:CVS) and its peers.

Increased competition (for the most part)

CVS has managed to buck the trend of declining revenue for drug stores thanks to pharmacy volume growth and increased drug prices. Walgreen Company (NYSE:WAG) would likely be right in line with CVS if it hadn’t lost so many customers after deciding to cut ties with Express Scripts. However, Walgreen Company (NYSE:WAG) is back on board with Express Scripts by offering its Smart90 Walgreen Company (NYSE:WAG), which will allow clients to pick up 90-day prescription drug supplies at Walgreen Company (NYSE:WAG) locations. Walgreen had already been getting some of its customers back, and this move should further boost momentum.

CVS Caremark Corporation (NYSE:CVS) and Walgreen have mostly traded together throughout the years, with Walgreen Company (NYSE:WAG) being the stronger all-time performer. However, CVS has outperformed Walgreen over the past three years, with the stock appreciating 107%, versus 86% for Walgreen Company (NYSE:WAG). In most market environments, these would be stupendous numbers, but in today’s market, or since March of 2009, it’s nothing special, especially considering another company has outperformed CVS Caremark Corporation (NYSE:CVS) and Walgreen Company (NYSE:WAG) over the past three years. The much smaller Rite Aid Corporation (NYSE:RAD) has seen stock appreciation of 200% over a three-year time frame.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.