CVS Health Beats Estimates; Guides Lower
CVS Health’s (NYSE: CVS – $109.96) second-quarter earnings rose 2.1% thanks to strong sales of pricey specialty drugs and to processing more claims through its pharmacy benefits business. That offset another weak quarter from its drugstore business, which was hit by a fall in customer traffic and a large drop in sales after last year’s decision to stop all tobacco products. The corporate results topped the company’s forecast, although the outlook for the third quarter fell short of analyst estimates. Excluding items, CVS earned $1.22 per share and net revenue rose 7.4% to $37.17 billion. Analysts on average had expected earnings of $1.20 per share and revenue of $37.18 billion. Sales in the Pharmacy Segment climbed 12%, primarily driven by growth in specialty pharmacy and pharmacy benefits network claims. Revenues in the Retail Pharmacy Segment increased 2.2%, or $371 million, to $17.2 billion in the period. Same store sales increased 0.5% versus the second quarter of last year, with pharmacy same store sales up 4.1% and front store same store sales down 7.8%. On a comparable basis, front store same store sales would have been about flat if tobacco and the estimated associated basket sales were excluded from last year’s second quarter. During the three months ended June 30, CVS opened 25 new retail drugstores and closed 5 outlets and relocated 16 stores. As of June 30th, the company operated 8,028 locations in 47 states, the District of Columbia, Puerto Rico and Brazil. CVS raised the lower end of its 2015 adjusted profit forecast range to $5.11 per share and cut the higher end to $5.18. The company had earlier forecast adjusted profit of $5.08-$5.19 per share. Cash flow generation at CVS is healthy and should enable the company to continue rewarding shareholders and making bolt-on acquisitions, such as Omnicare and the Target pharmacy business, that expand its reach into new, faster-growing market niches.