CVS/Caremark – The merger paid off but moves the stock less than 2 percent

CVS/Caremark Corporation (CVS) reported earnings today rose 24% on strong revenue in the first quarter. Net income after paying preferred dividends grew to $405.4 million, or 43 cents per share, from $326.1 million, or 39 cents per share, a year ago. The merger of CVS and Caremark is a success and result – the stock is up 1.8%.

For those of you playing today’s earnings call and making your bets yesterday did you expect a big jump if they pulled it off? For those playing the shorts, did you think the share price was going to tank? Now that CVS/Caremark Corporation is mammoth drug corporation the stock is going to tread water. Yesterday I called them the "Wal-Mart (WMT) of the drug world" and the reaction that Wall Street is showing to today’s earnings call is justifying that labeling.

Despite same-store sales increasing 6.6%, driven by health and beauty, digital photo and private label and proprietary brands, it feels like we got another Starbucks (SBUX) on our hands. CVS/Caremark Corporation plans to open 100 stores this year and continues to expand its presence in the high-growth areas of Florida, California, Texas and Arizona. They also are planning to open an additional 300 MinuteClinics, walk-in clinics that provide care for about 20 common ailments. All they need to do is merge with Starbucks or Panera Breads (PNRA) and they can start selling more than drugs, lift the same-store sales numbers and make some real money. "I’ll take a double-tall mocha, some Prozac, that blueberry muffin, and don’t forget my azithromycin."

If you’re looking for a safe bet in what could become a Bear market in the coming weeks, CVS may be your pick. CVS/Caremark Corporation is here to stay, they pulled if off, now for investors the concern becomes the stock price – will it start to move?

Frank Lara Jr.

Frank Lara Jr. can be reached at [email protected]; he does not own securities in the companies he covers.