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CVS Gains After Raising Forecast for Second Quarter in a Row

CVS Surges After Raising Forecast for Second Quarter in a Row

(Bloomberg) -- CVS Health Corp. raised its 2019 earnings forecast for the second time this year after topping Wall Street’s estimates, driven by growing revenue and profit at the drug-benefits unit. The shares were up 5.1% to $56.86 at 10:17 a.m. in New York.

  • The company expects adjusted earnings for the year to be $6.89 to $7 per share, an increase from its May forecast of $6.75 to $6.90. Read more details on the results here.

Key Insights

  • CVS’s success as a mix of corner pharmacies, drug-benefit services and health insurance is a contrast to its competitors. While CVS raised its forecast, retail rival Walgreens Boots Alliance Inc. has been slashing costs and closing stores -- including Tuesday’s announcement that it would shut down 200 more U.S. locations.
  • On a conference call, CVS executives said the company will open fewer drugstore locations this year than it has in the past, as the company focuses on converting existing stores to new hubs with extended health services. The new health hubs will provide a more seamless experience, CVS Chief Executive Officer Larry Merlo said on the call: “That will create an advantage for us against potential standalone competitors.”
  • The company reported higher prescriptions and sales in both its drugstore business and its pharmacy benefits unit, a sign that its strategy of having several businesses to steer customers to its pharmacies is paying off. Pharmacy prescription claims rose 5.9% in the second quarter, driven in part by collaborations with benefits managers and Medicare drug plans.

CVS Gains After Raising Forecast for Second Quarter in a Row

Know More

  • Despite CVS’s strong quarter, the stock has been challenged. Through Tuesday, the shares had lost 17% year to date, compared with a 25% decline in Walgreens shares and a 52% slide by Rite Aid Corp.
  • The Woonsocket, Rhode Island-based company reported profits of $1.93 billion, compared with a $2.56 billion loss in the second quarter of 2018.

To contact the reporter on this story: Robert Langreth in New York at rlangreth@bloomberg.net

To contact the editor responsible for this story: Drew Armstrong at darmstrong17@bloomberg.net

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