CVS Affirms Wall Street’s 2022 Earnings Views; Shares Rise
(Bloomberg) -- CVS Health Corp.’s initial 2022 earnings outlook matches Wall Street’s expectations, Chief Financial Officer Shawn Guertin said Tuesday on a call with analysts.
At this point, analysts’ average expectation for adjusted profit of $8.20 a share falls within the company’s current thinking, Guertin said. CVS plans to provide more details at its December investor day, he said. The shares rose as much as 4% as of 9:38 a.m. in New York, the most intraday since May.
Guertin spoke on the call after CVS said this year’s adjusted earnings will rise to a range of $7.90 to $8 a share, a 20-cent increase from its earlier forecast, as third-quarter earnings and sales beat Wall Street’s expectations.
The company said Covid expenses would pressure its health-care benefits unit for the remainder of the year. While it’s extremely difficult to predict the path of the virus, Guertin said, CVS anticipates the costs from Covid testing and care will decrease next year, benefiting the health insurance business.
On the retail side, CVS expects tests, shots and virus-related store purchases to decline significantly next year. Together, tests and vaccines are expected to pull in $3 billion in revenue this year.
Booster shots and a delta-variant induced surge in coronavirus cases renewed demand for Covid vaccines and virus tests in the third quarter, buoying CVS’s retail segment. Those same cases are raising costs of care in the insurance unit, as well as at rival Humana, whose shares fell 7% in premarket trading after a cut in its annual forecast.
Quarterly adjusted earnings were $1.97 a share, CVS said, beating the average projection of $1.78. Revenue of $73.8 billion surpassed the $70.5 billion consensus.
Revenue at the CVS’s health-care benefits segment jumped 9.5% to $20.48 billion thanks to growth in its government insurance business. However, Covid-related costs pushed Aetna’s medical-benefit ratio to 85.8%, up from 84%. CVS now expects elevated medical costs in the fourth quarter, the company said in its filing. It previously anticipated modestly elevated expenses.
The drugstore chain will start immunizing children now that the U.S. has authorized Pfizer’s vaccine for kids ages 5 to 11. CVS expects vaccinations to slow in the fourth quarter, the company said in a quarterly filing.
The company’s pharmacy benefits management unit posted $39.05 billion in revenue, up 9.3% from the year-ago quarter. The company attributed the increase to a rebound in pharmacy claims, growth in its specialty pharmacy and brand inflation.
CVS recorded a $431 million impairment in the quarter for its long-term care business. The charge caused operating income to decrease 5.8% from the year-ago quarter.
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