CVS Caremark’s (CVS) third quarter earnings came in at $0.65, a cent above the Zacks Consensus Estimate and higher than $0.60 reported in the year-ago period. Revenues increased 18.2% year over year to $24.6 billion driven by robust growth of both the Pharmacy Services and Retail Pharmacy segments.

The company is maintaining its momentum and recently opened its 7000th store. However, we remain deeply concerned with the loss of $4.8 billion of contracts for 2010. Additionally, the company is being investigated by the Federal Trade Commission for some of its business practices.

We believe all these issues will have a negative impact on the stock price. As a result, we downgrade the stock to Underperform with a target price of $30.

Zacks Investment Research

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