CVS Raises Forecast as Drug Services, Retail Segments Gain

(Bloomberg) -- CVS Health Corp. raised its 2019 profit forecast after the reporting strong results across its pharmacy services, health insurance and drugstore segments for the third quarter.

  • After beating analysts’ estimates, CVS said its 2019 adjusted earnings will be to $6.97 to $7.05 a share, up from $6.89 to $7.00. For more details on the results, click here.

Key Insights

  • Despite ongoing pressure from politicians and consumers on drug prices in the U.S., including the role of companies like CVS that manage patients’ pharmacy benefits, the PBM unit is performing well. Revenue at the business, called Caremark, was up 6.4%, and adjusted operating income rose 5.7% to $1.44 billion. “The debate has now shifted not on the PBMs, but to the manufacturers in terms of why are the list prices what they are,” Chief Executive Officer Larry Merlo said on a conference call with analysts.
  • At the company’s brick-and-mortar pharmacies, retail sales rose -- good news in an industry that’s been beset by pressure from online competitors. Front-of-store revenue was up from a year ago, thanks to sales of beauty products and over-the-counter cold and cough medicine.
  • The health-insurance business CVS acquired with its takeover of Aetna last year is proving highly profitable: it reported better margins than the retail and pharmacy benefits segments.

Know More

  • The shares gained 4.8% to $70.55 at 10:12 a.m. in New York, and Woonsocket, Rhode Island-based CVS is up almost 3% this year as of Tuesday’s close. That’s far better than the 10% decline by its biggest drugstore rival, Walgreens Boots Alliance Inc., which Bloomberg reported Tuesday is reviewing a possible leveraged buyout with private equity firms.
  • CVS has been transforming some of its stores into “health hubs,” transitioning retail floor space into areas where customers can get medical and other health services. The move is a part of CVS’s shift from a retail drugstore chain to focus more on integrated health-care services in the wake of its acquisition Aetna.
  • Net income in the third quarter was $1.53 billion, up from $1.39 billion a year prior.
  • To read the company’s press release, click here.

©2019 Bloomberg L.P.

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