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CVS net up, but shares fall
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October 27, 1999: 3:29 p.m. ET
Top U.S. drugstore chain meets 3Q forecast, but investors remain sour
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NEW YORK (CNNfn) - CVS Corp. used record growth in sales to meet Wall Street's third-quarter earnings expectations Wednesday, but investors balked at plans to accelerate spending on expansion and technology.
The Woonsocket, R.I.-based drugstore chain posted earnings of $121.6 million, or 30 cents per share, for the three months ended Sept. 25, up from $102.4 million, or 25 cents per share, a year earlier.
However, while earnings met analysts' consensus estimate as compiled by First Call Corp., investors quickly sent CVS (CVS) shares down 5-1/2 to 38 in late afternoon training.
"This is a company that's beaten consensus estimates for a number of quarters in a row," said Eric Bosshard, an analyst with Midwest Research. "This time it just hit the consensus with margins a little lower softer than expected."
CVS Corp.'s stock activity on Wednesday…
Net sales for the quarter grew nearly 16 percent to a record $4.3 billion, while same-store sales grew 12.2 percent.
Pharmacy sales continued to drive the company's revenue growth, increasing 18 percent for the quarter. However, expenses also grew nearly 15 percent to $921.4 million as the company opened 27 new stores and relocated 82 others.
CVS plans to speed investments in its CVS.com online business and its CVS ProCare business, a specialty pharmacy unit that serves patients with HIV/AIDS and other conditions requiring complex treatment, CVS spokesman Todd Andrews said.
"We've got momentum sellers. The company didn't beat the earnings forecast on the upside," said analyst Mark Husson of Merrill Lynch Global Securities.
"They said they were investing in their growth, which is something we pay management to do," Husson added. "The fact that the market takes this perverse view is baffling."
…and year-to-date.
Added analyst Jack Russo of A.G. Edwards: "People are nervous with increasing spending that they're not going to hit the numbers (going forward)."
Despite the setback, Bosshard of Midwest Research said the company is on the right track.
"I think they're up to task," he said, "but it's going to cost them a little money in the near term to do it."
For the first nine months, CVS earned $448.8 million, or $1.10 per share, excluding non-recurring charges. That's up from the $364.3 million, or 90 cents per share, in the year-ago period.
CVS said it expects to meet First Call's consensus earnings forecasts of 43 cents a share for the fourth quarter and $1.54 for the year.
"We're growing the company for the long term, and it's difficult to explain the vagaries of the market at this point in time," Andrews said.
CVS declined to quantify how much it plans to increase internal investment. 
-- from staff and wire reports
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CVS Corp.
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