CVS Health Corp. raised its full-year guidance on Wednesday, after reporting sales and earnings that topped Wall Street expectations.
Following a downbeat projection for 2019 in February, CVS CVS, +5.42% snapped back by delivering sales of $61.65 billion, up 35% from a year ago and ahead of FactSet analysts’ expectation of $60.38 billion. The company raised its 2019 adjusted EPS guidance range to $6.75 to $6.90 from $6.68 to $6.88.
Overall profit grew to $1.42 billion, or $1.09 a share, from $998 million, or 98 cents a share, in the same period a year ago. Excluding non-recurring items, adjusted EPS came to $1.62, above the FactSet consensus of $1.50.
The sizable increase in revenue was largely driven by income from health insurer Aetna Inc., which was acquired by the pharmacy chain in November. Higher market prices for brand-name drugs and an increase in prescriptions also helped drive sales.
CVS’s health-care segment, which now includes Aetna, brought in sales of $17.87 billion in the latest quarter, compared with just $1.318 billion a year ago. Back then, the segment only consisted of the company’s SilverScript Part D prescription drug plan business.
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Sales of the pharmacy services segment rose 3.1% to $33.558 billion, while the retail segment brought in $21.115 billion, a 3.3% increase from last year — thanks to a 5.5% bump in the number of prescriptions filled.
Same-store sales rose 3.8% and same-store pharmacy sales grew 4.9%, soundly beating analysts’ expectations. Front-end same-store sales, which were expected to fall, actually grew by 0.4%, which CVS attributed to an increase in health-product sales.
Despite the positive earnings news, CVS acknowledged some challenges: Gains in revenue were offset by reimbursement pressure and an increased dispensing rate of cheaper generic drugs, the company said. Walgreens Boots Alliance, which missed earnings estimates and slashed its full-year outlook in April, also cited reimbursement pressure and low generic prices as problems.
CVS is looking at new ways to make money. In February, the company unveiled a pilot program of three health-focused concept stores in Houston. Dubbed “HealthHUB“ stores, they offer expanded health-related offerings, such as kiosks where customers can track their blood pressure, weight and BMI; wellness rooms for hosting health classes; and dieticians who can offer nutritional advice.
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“While it is early, we are very encouraged by the initial results in our Houston stores. The various product and service offerings are performing at or above our expectations,” CVS Chief Executive Larry Merlo said in a Wednesday call with analysts. He said the company is now planning to expand the “HealthHUB” model to the rest of the Houston market. Management is expected to provide more details during CVS’s investment day next month.
Shares of CVS rose 5.5% in Wednesday trade, a welcome positive after a rocky few months. CVS’s stock has fallen 12.4% so far this year amid a broader health-care selloff sparked by investors’ anxiety over the health-care regulatory landscape, while the S&P 500 SPX, -0.75% has gained 17.5%.
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