CVS on the Horizon

We've seen Walgreen's (NYS: WAG) and Rite Aid's (NYS: RAD) earnings reports, and CVS Caremark (NYS: CVS) is on deck to report early next month. Analysts expect CVS' earnings to come in at $0.63 per share, 21% higher than the $0.52 it reported last year. What else can we look forward to?

Great expectations
CVS closed fiscal 2011 by raising its yearly guidance by $0.03 to between $3.18 and $3.28 per share. The company expected to cash in on Walgreen's breakup with pharmacy benefits manager Express Scripts (NAS: ESRX) . With customers unable to fill their prescriptions at Walgreen stores, it is an open invitation for the likes of Rite Aid and CVS Caremark to eat into Walgreen's market share.

Walgreen's profits fell this quarter, as it reportedly lost a significant 85% of its business it enjoyed under the Express network. Rite Aid's prescriptions rose as it gained new clients from the breakup and CVS has every reason to expect similar gains.

No. 1 no more
One major development in the pharmacy benefits management space this quarter has proved detrimental to CVS: the completion of Express and Medco's $29.1 billion merger. The merger has led to the creation of the largest pharmacy benefits operator in the U.S., knocking CVS off its perch. It is widely feared that the coming together of the two will create a monopoly of sorts in the PBM segment, with the combined entity likely to have a huge say in prices. The extent to which CVS can handle this increased competition remains to be seen. And maybe we can get an inkling of its reaction from the earnings release.

Growing top line
The Rhode Island-based retailer has seen its revenue rise for five straight quarters. Last quarter, CVS' revenue rose 15%, aided by a whopping 32.4% increase in revenue from its pharmacy services. The rise in the last quarter was, in part, due to its contract with health insurer Aetna (NYS: AET) . The two entered into a 12-year partnership to provide high-value pharmacy plans. Analysts expect CVS' top line to grow by a further 10.5% this quarter.

CVS' earnings are slated to come out May 2. For the time being, to get more earnings-season insight, check out our brand-new free report "5 Stocks Investors Need to Watch This Earnings Season."

At the time thisarticle was published Fool contributor Shubh Datta doesn't own shares in the companies listed above. Motley Fool newsletter services have recommended buying shares of Express Scripts. The Motley Fool has a disclosure policy.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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