Digging deeper, the U.S. is carrying its core market at 3%-4% growth, with the U.K., German and Australian market barely registering any growth. Spain was particularly weak. In contrast, emerging markets enjoyed double digit growth (Russia, Eastern Europe, Brazil and China). India accounted for 2% of revenues, but a compliance issue resulting in an investigation into its Indian business resulted in a $0.01 charge to its Q4 EPS. Its Teachers scotch is the number 1 scotch in India, so while there are underlying concerns, the long-term prospects for the business in India remain favorable.
The company expects the same business trends to continue through 2013 (i.e. Emerging markets and U.S. to perform well, slow growth elsewhere). Beam trades at a comfortable P/E premium, and this premium will fall as core earnings grow. Investors will view this as an opportunity and help take the stock past the $65 ceiling, which has kept it out of the news until the recent furor dropped it in.
CVS Caremark Corporation (NYSE:CVS)
CVS Caremark Corporation (NYSE:CVS) has traveled further along the rally path than the aforementioned stocks, but reached a block just shy of $53. Q4 earnings didn’t set the world alight despite a 6% gain in quarterly earnings.
Generic drugs, the bane of brand pharmaceutical companies such as Eli Lilly, also impact the pharmacies which supply them. Because of generics cheaper price, revenues for pharmacies fall, but the offset is higher margins, which brings higher net incomes from those sales. However, CVS Caremark managed to defy this logic by reporting a 11% growth in revenues. This was in part due to a 9% increase in prescriptions filled, helped by a 4% rise in same-store sales.
The rise in same-store sales has in part, come from CVS’s MinuteClinic. The MinuteClinic provides treatment services for minor health conditions, in addition to performing health screenings and other services. CVS operates 640 clinics, many of which operate within existing drugstores. This offers revenue from the consultation in addition to revenues from prescriptions filled in-store. The provision of the Patient Protection and Affordable Care Act will likely increase utilization of this service as more people look to use health services.
The company has made tentative moves internationally, acquiring a privately held drugstore chain of 44 stores in Sao Paolo, Brazil. The acquisition was of no “material cost” to CVS, and is tiny against the company’s 7,352 drugstores in the U.S. But this foray into an emerging market space could lead to a more aggressive move into this space if it proves a success.
Going forward, the company raised guidance for 2013 by a couple of cents to $3.86-$4.00 range. Operating in a more defensive side of the retail sector should provide some measure of protection during market sell offs.
O’Reilly Automotive Inc (NASDAQ:ORLY)
O’Reilly Automotive Inc (NASDAQ:ORLY) delivered big gains from the March 2009 low to a $107 peak in 2012. The stock subsequently eased from the May 2012 peak as investors took money off the table. However, Q4 earnings offered a timely boost to gap the stock back toward all-time highs.
Within the sector, AutoZone, Inc. (NYSE:AZO) is offered as the more attractive play, but O’Reilly may be better positioned to drive higher. Buying volume in O’Reilly Automotive increased four-fold on the day earnings were released and the entire earnings-driven price gain held in the days since.
