A Cautiously Optimistic CVS

Last week, CVS (NYSE:CVS) provided investors with a mixed earnings report that hasn't thus far been well-received by the market. Despite posting record sales and earnings that beat estimates, same-store sales (comps) came in below expectations. Sales were obviously boosted by the inclusion of revenues from the recently acquired Eckerd stores, even though those numbers weren't yet included in comps. Overall, I think the results indicate that CVS is in good shape and well-positioned to benefit from continued growth in this industry.

For the quarter, CVS earned $275.9 million, or $0.33 per share, which is an increase of 17.9% from a year ago. Those results topped the average analyst estimate of $0.31 per share. The company credited the strong quarter, ironically, to "healthy" demand for prescription drugs and the successful integration of the Eckerd stores. Record sales of $9.1 billion (up 31%) also contributed significantly.

CVS generated robust same-store sales growth of 5.1% on top of last year's 4.1% growth. While those results were solid, estimates called for an even higher 6% increase.

Despite the solid results, CVS increased its full-year earnings guidance by just a penny. It expects per-share earnings of $1.36 to $1.39, while analysts are looking for $1.37 per share. The company expects to continue to benefit from sales of high-margin generic drugs, particularly with the patents on a plethora of drugs, including Motley Fool Inside Value pick Pfizer's (NYSE:PFE) Zoloft, set to expire.

Countering that, however, CVS cited higher costs associated with its Eckerd stores as reason for its cautious outlook. The Eckerd stores, which have a huge presence in Texas, face stiff competition there from Walgreen (NYSE:WAG). This might be a problem, since CVS is counting on growth from its Eckerd stores in that state.

In general, I'm inclined to ignore all the debates surrounding estimates and the company's guidance going forward. All that data can be manipulated anyway. I prefer to look at the performance of the company and its industry. Clearly, this industry should experience strong growth as our population ages and demands more prescription drugs. And CVS continues to post great results -- earnings, sales, and comps all increased, and its integration of Eckerd is progressing smoothly. All things considered, the outlook seems bright for investors in this company.

Your Rx-related Foolishness is ready for pick up:

• CVS Settles Up
• Business As Usual at Walgreen

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Fool contributor Mike Cianciolo welcomes feedback and doesn't own shares of any of the companies in this article.