I'm rarely impressed by a company that has recently swallowed a relatively large acquisition and is signing up for another. But I can't complain about the fourth-quarter and fiscal 2005 results that CVS
The company is doing extremely well more than a year and a half after gobbling up Eckerd's. Given that successful addition, I'm beginning to think that an accretive addition to 2007 earnings and cash flow might not be the only thing to like about the company's acquisition of Osco and Sav-On stores from Albertson's
Of course, it doesn't hurt that sales, earnings per share, and free cash flow were all up for the year. Sales rose 21%, earnings per diluted share were up 25.5% (after removing a one-time benefit of $0.07), and free cash flow was up to $656.6 million after last year's dip to $63.1 million. In calculating the free cash flow, I've excluded the acquisition of Eckerd's, and I've given the company credit for its sale-leaseback proceeds. However, if the company continues to make smaller acquisitions like the Albertson's deal, I think a reasonable case can be made to start looking at numbers with acquisitions included.
Earnings and free cash flow were impressive at CVS this quarter, but I'm more impressed with the company's balance sheet; across the board, the company seems in better shape than it was a year ago. Working capital growth was tame compared to sales growth for the year, short-term debt was reduced by 71%, long-term debt is down, and none of the "other" accounts is so drastically out of line that it warrants a discussion.
Further doses of over-the-counter Foolishness: