CVS Caremark (NYSE:CVS) is ready to announce second-quarter results tomorrow, marking the first full quarter since the combination of giant drugstore chain CVS with pharmacy benefit manager (PBM) Caremark. Below is an overview of what to expect.

What analysts say:

  • Buy, sell, or waffle? Eighteen analysts follow CVS. Fourteen are bullish, and the rest have a hold rating on the stock.
  • Revenue. Analysts on average expect $20.6 billion in second-quarter sales, which is almost double last year's second-quarter sales amount. The jump is due primarily to the first-quarter acquisition of Caremark.
  • Earnings. Analysts project quarterly earnings of $0.46, or 15% growth over last year's quarter.

What management says:
CVS and Caremark were together for a full 10 days last quarter, starting the formal process of integrating the largest drugstore chain by total store count with one of the largest PBMs. As a result, 2007 is expected to be an integration year, full of the customary merger integration charges. In other words, it will take some time before Fools can discern what CVS/Caremark will look like as a fully combined entity.

What management does:
As a pure drugstore operator, CVS had a stellar track record of same-store sales growth and successfully acquiring other chains to boost organic growth. Management is also known for its innovation -- it blazed a new health-care trail by combining retail drug sales with the mail-order focus of PBM Caremark. It is also beginning to roll out MinuteClinics at its CVS stores; MinuteClinics are quick-care clinics intended to compete with doctors and offer consumers a more convenient way to get a health checkup.

Margin

10/05

01/06

04/06

07/06

10/06

01/07

Gross

26.8%

26.9%

27.0%

27.2%

27.2%

26.9%

Operating

5.5%

5.5%

5.7%

5.7%

5.7%

5.7%

Net*

3.3%

3.3%

3.4%

3.3%

3.1%

3.1%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
CVS Caremark is already a reality, and the second quarter marks its first full quarter as a unified firm. However, it will still be some time before we see what the potential is, as it's too early to tell if managed-care giants such as UnitedHealth (NYSE:UNH) and Aetna (NYSE:AET) will flock to CVS Caremark on the appeal of offering members multiple avenues to purchase drugs under one umbrella.

In any case, the merger served as a warning to archrivals to innovate or die, and may be a key reason Walgreen (NYSE:WAG) is becoming more of a deal maker -- it agreed to acquire specialty pharmacy provider Option Care (NASDAQ:OPTN) early last month. In fact, if the CVS/Caremark merger really pays off, Medco Health (NYSE:MHS) could end up falling into the arms of Walgreen or Rite Aid (NYSE:RAD), the third-largest player in the drugstore space.

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Fool contributor Ryan Fuhrmann is long shares of Walgreen but has no financial interest in any other company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.