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Drug Stores are Pocketing Cash

David Becker
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The drug store business continues to experience upward momentum and it is CVS which is leading the way higher. CVS/Caremark Corp (NYSE:CVS) together with its subsidiaries, provides integrated pharmacy health care services in the United States.

The company updated the market about its long-term growth strategy, accompanied by the 2014 guidance. Adjusted earnings for 2014 are seen between $4.36 and $4.50 per share, up 10 to 14% on the year before. Earnings on a GAAP basis are seen between $4.09 and $4.23 per share. The guidance sees revenues are seen up 4% to 5.25%, resulting in expected annual revenues of around $132 billion. Growth is partially supported by same store sales growth of 0.75 to 2%.

The 52-week range of CVS is $ 49.44 – $71.99, and the stock hit a 52-week high in late December. Earnings increased 28% quarter over quarter which the 3-year growth rate of earnings increased 14%. Sales increased 6 percent quarter over quarter and the three-year growth rate of sales was up 11%. The company PE of 18, a profit margin of 5.5% and 1.6% dividend yield.

Recent insider buying makes the stock look attractive. Per Loftberg purchased 402K shares on January 2, 2014 for a total value of 13 million dollars. He purchased another 234K shares for a total value of 8.1 million dollars on January 3, 2014. Johnathon Roberts purchased 102K shares on January 3, 2014 for a total value of 3.6 million dollars.

The technical outlook is positive as the stock stabilizes after its recent run up. The stock price is holding support levels near an upward sloping trend line. Additional support is seen near the 50-day moving average near 66.60. The RSI (relative strength index) is printing near 56 which is in the middle of the neutral range. The Bollinger band width is moving lower reflecting declining historical volatility.

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