CVS Caremark Corp. shareholders, who have sent the company's stock to several all-time high prices this summer, will get a fresh update on the drugstore chain and pharmacy benefits manager when it reports its second-quarter results Tuesday.

WHAT TO WATCH FOR: How generic drugs continue to help earnings for CVS Caremark and its competitors.

The industry has benefited from an influx of patent expirations for brand-name drugs. This exposes those drugs to cheaper generic competition and ultimately hurts revenue for drugstore operators and pharmacy benefits managers.

But generics also help profitability because they provide a wider margin between the cost for the pharmacy to purchase the drugs and the reimbursement received.

The Woonsocket, R.I., company also has said that it is still benefiting from a business split last year between Walgreen, the nation's largest drugstore chain, and Express Scripts Holding Co., the largest PBM.

The companies resumed doing business last September after a break of several months. But during that break, many Walgreen customers migrated to CVS stores because they needed a new place to fill prescriptions. CVS Caremark has made retaining those customers a top priority.

CVS Caremark CEO Larry Merlo told analysts in May that they remain confident they will keep at least 60 percent of the prescriptions the company gained through this year.

The company also has made it a priority to add Minute Clinics to its stores, and analysts will be looking for an update on that. CVS Caremark has said it expects to have nearly 800 by the end of this year and 1,500 nationwide by 2017.

Industry watchers expect brisk growth in these in-store clinics because they can be more accessible than doctor's offices, and they offer a less expensive form of care for relatively minor maladies. They also are expected to help ease problems with care access as millions of people are expected to gain insurance coverage over the next few years through the federal health care overhaul.

CVS Caremark shares have climbed about 28 percent so far this year after closing 2012 at $48.35. The company offers a quarterly dividend of 22.5 cents per share, which is attractive to shareholders. Analysts say investors also like the company for its potential to gain business under the health care overhaul.

WHY IT MATTERS: CVS Caremark ranks 13th on the 2013 Fortune 500 list of biggest U.S. companies based on annual revenue. With more than 7,500 drugstores, the company runs the second-largest chain in the United States after Walgreen. Its Caremark unit also is one of the nation's largest PBMs.

PBMs run prescription drug plans for employers, insurers and other customers. They process mail-order prescriptions and handle bills for prescriptions filled at retail pharmacies.

WHAT'S EXPECTED: Analysts expect, on average, earnings of 96 cents per share on $31.17 billion in revenue, according to FactSet.

LAST YEAR'S QUARTER: The company's second-quarter earnings jumped more than 18 percent, as it gained several million prescriptions thanks to the Express Scripts-Walgreen split. A 31 percent spike in revenue from the company's pharmacy benefits management business also helped the performance.

CVS Caremark earned $966 million, or 75 cents per share, in the quarter as revenue climbed 16 percent to $30.71 billion.

 

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