CVS Caremark Corporation (CVS) Now Tobacco-Free, Stock Rising like Puff of Smoke


CVS Caremark Corporation (NYSE:CVS) announced back in February that they would cease their sale of tobacco products by October 1 of this year. Today it was revealed that the company is already tobacco-free nearly a month ahead of schedule, and proud of both their decision and accomplishment. CEO Larry Merlo was on CNBC today to discuss the announcement and direction of the newly named CVS Health.

CVS Health

“We have many opportunities to play a bigger role in healthcare delivery and you know we have our 7,700 CVS pharmacies, we’ve got a leading pharmacy benefit management company, we have walk-in medical clinics now, so we’re doing many things to change and help shape the future of health care delivery,” Merlo said.

As Merlo said, the decision by CVS Caremark Corporation (NYSE:CVS) was borne on their desire to play an expanding and leading role in health care delivery, and recognizing that the sale of tobacco was counter to that goal. While the move was praised for its idealism, abandoning a $2 billion stream of revenue was met with skepticism by investors and analysts.

Despite that, the CVS Caremark Corporation (NYSE:CVS) stock has not suffered any ill-effects owing to its abandonment of tobacco sales; in fact the stock has steadily risen over the past six months to sit at just over $80 today, and there is some sense that the company has engendered more loyalty from many customers because of their commitment to their health. As Merlo said, the company has had a very successful selling season, and been awarded more than $5 billion in new business.

CVS Caremark Corporation (NYSE:CVS) is now also in a position to capitalize on their planned smoking cessation campaign, which they should also benefit greatly from thanks to their commitment to ending tobacco sales, which their studies have shown will have a positive correlation in the smoking rates and not simply drive all smokers or would-be smokers to purchase their tobacco somewhere else.

Paul Tudor Jones’ hedge fund Tudor Investment Corp was one of a number of hedge funds to add CVS Caremark Corporation (NYSE:CVS) to their portfolio during the last reporting quarter, purchasing 5,542 shares in the company.

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