CVS advances as analysts say drugstore operator will top rivals in weak economic times

NEW YORK (AP) -- Shares of CVS Caremark Corp. rose Tuesday after analysts said they expect the drugstore operator and pharmacy benefits manager to perform well in the face of a difficult economy.

In client notes published early in Tuesday, Citi Investment Research analyst Deborah Weinswig said investors should focus on CVS and other "staple names," because customer traffic and sales trends have been relatively strong there.

Separately, Scott Mushkin of Jefferies and Co. said CVS is his top pick in the food and drug retail sector. He said CVS could surpass expectations in the third quarter, and should be able to grow despite sluggish drug prescriptions and consumer spending.

The Woonsocket, R.I.-based company's stock rose 91 cents, or 3.2 percent, to close at $29.76.

CVS shares have dropped 21.5 percent since the start of trading on Sept. 15, when the credit crisis intensified following the bankruptcy of Lehman Brothers, the sale of Merrill Lynch and the government bailout of insurer AIG. The stock set reached its lowest price in nearly three years on Thursday.

Weinswig said investors should take advantage of that weakness. However, she predicted continued economic struggles, she reduced her profit and same-store sales estimates for CVS in 2009 and 2010, and cut her target price to $42 per share from $52.

"We believe the CVS/Caremark model is gaining traction, as CVS's scale and breadth of health care offerings, unmatched by any PBM or drugstore competitor, is appealing to clients and leading to incremental PBM clients and best-in-class retail execution and market share gains," she wrote.