CVS Caremark's first-quarter earnings jumped 18 percent as generic drugs and an acquisition helped the drugstore chain and pharmacy benefits manager weather rough winter storms and a later Easter holiday. The company fell shy of Wall Street profit expectations and reaffirmed its 2014 earnings forecast. Shares slipped more than 2 percent before markets opened.
CVS Caremark Corp. runs the nation's second-largest drugstore chain and one of the biggest pharmacy benefits management operations.
Benefits managers run prescription drug plans for employers, insurers and other customers. That segment has become CVS Caremark's biggest revenue producer. Sales from the unit climbed more than 10 percent to top $20 billion in the quarter, helped in part by rising drug prices, as well as the company's acquisition of the drug infusion business Coram.
Revenue from the company's drugstore segment climbed 3 percent, held back by a weaker flu season compared with last year. Severe winter weather also curtailed sales by keeping customers home and away from CVS stores.
An Easter holiday that fell in the second quarter this year hurt non-pharmacy sales during the quarter.
Growth in generic drug use did help the company's bottom line. The growing use of generics, which are cheaper than brand-name drugs, has improved pharmacy profitability for several quarters now. Generics provide a wider margin between the cost for the pharmacy to purchase the drugs and the reimbursement it receives.
CVS earned $1.13 billion, or 95 cents per share, in the three months that ended March 31. That compares with earnings of $954 million, or 77 cents per share, in last year's quarter. Revenue climbed 6 percent to $32.69 billion.
Adjusted results totaled $1.02 per share, which was 2 cents shy of Wall Street expectations and a penny shy of what the company expected.
But CVS Caremark beat analyst projections for revenue of $32.3 billion in revenue, according to FactSet.
The company reaffirmed a forecast it first made in December for 2014 adjusted earnings of between $4.36 and $4.50 per share. Analysts expect earnings of $4.47 per share.
CVS Caremark gained national attention in February, including praise from President Barack Obama, after vowing to phase out tobacco products from its stores, more than 7,600 nationwide, by October.
The company, like other drugstore chains, has been raising its focus on health care by adding in-store clinics and seeking to work more with doctors and hospitals to manage patient care. Company leaders said tobacco has no place in a health care setting like that.
CVS anticipates a $2-billion hit to its revenue because of the decision, but executives have also said that it won't affect their earnings forecast.
Company shares dropped $1.09 to $72 about an hour before trading started Friday.