CVS Raises Forecast as Pharmacy Acquisitions Pad Salesby
Pharmacy revenue offsets decline in front-of-store sales
Full-year adjusted earnings will be $5.81 to $5.89 a share
CVS Health Corp. beat analysts’ earnings estimates in the second quarter and raised its full-year forecast, as recent deals to add pharmacies and a nursing home drugs business helped grow revenue at the drugstore and pharmacy benefit management company.
Earnings this year, excluding one-time items, will be $5.81 to $5.89 a share, up from the company’s earlier forecast of $5.73 to $5.88 a share. In the second quarter, adjusted earnings were $1.32 a share, Woonsocket, Rhode Island-based CVS said in a statement, compared with the $1.30 average of analysts’ estimates compiled by Bloomberg.
Revenue rose 18 percent to $43.7 billion, below analysts’ expectations of $44.3 billion, as CVS expanded its drugs business. Last year it acquired pharmacy locations inside Target Corp. stores for $1.9 billion and spent $12.9 billion for the nursing home pharmacy Omnicare Inc.
CVS’s competitors are expanding as well. UnitedHealth Group Inc.’s drug benefits arm, OptumRx, bought benefit-management company Catamaran Corp. in July 2015. In addition, Walgreens Boots Alliance Inc. agreed last year to purchase Rite Aid Corp., which could threaten CVS’s market share in the retail drugstore market.
Second-quarter net income fell 27 percent to $924 million, or 86 cents a share, from $1.27 billion, or $1.12 a share, in the previous year. CVS said the decrease came from costs related to early extinguishing of debt, higher interest expenses from debt the company took out to finance its recent deals, and integration costs.
Other highlights from the quarterly results:
- Same-store sales increased 2.1 percent, as pharmacy volumes grew and front-of-the-store retail sales decreased.
- Network claims in the drug benefits business increased 23 percent to 280.5 million claims.
- Pharmacy-services revenue increased 21 percent, driven by growth in network claims volume and specialty pharmacy.