CVS Caremark Corporation (CVS), Walgreen Company (WAG), Express Scripts Holding Company (ESRX): Three Drugstore Stocks You Must Own

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Some of the cost-savings will be a result of switching toward Medco’s IT platform and following its mail orders electronically. This will further help the company to provide affordable treatment, thereby eliminating huge costs for patients. Also, with this deal, Express Scripts will gain from increased mail penetration and the enhancement of specialty drugs in its portfolio. I believe Medco will drive working capital benefits to Express Scripts and will provide further momentum to its growth.

As a part of the company’s strategy, a portion of the cost-savings from the Medco deal will be used for its share buyback plans. Express Scripts has announced a repurchase of 75 million shares and plans to buyback around 35 million shares by the end of 2013. The company expects to spend around $1 billion in 2013 and $2 billion to $3.5 billion by 2014. This buyback plan can offer support to the company’s future EPS. The estimated EPS for Express Scripts is $4.33 and $4.71 for 2013 and 2014, respectively.

Bottom line

CVS Caremark Corporation (NYSE:CVS) and Walgreen, in direct competition to each other, have come up with affordable medical treatment for their patients by better cost efficiency. In order to meet customers’ needs, these companies are expanding their services with an aim to deliver quality healthcare services at reasonable prices. These initiatives will definitely bring more customers and more revenue to the companies.

On the other hand, Express Scripts with its Medco deal seems to be the strongest player in the industry. The company seeks to generate cost savings of around $1 billion, which will be used for its share buyback program and further expansion plans. I recommend these three stocks as buys.

The article 3 Drugstore Stocks You Must Own originally appeared on Fool.com and is written by Shweta Dubey.

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