CVS’ Results Top Views as Prescription Volumes Climb; Confirms Guidance
CVS Health (NYSE: CVS – $104.04) reported net revenues for the first quarter increased 18.9%, or $6.9 billion, to $43.2 billion, compared to a year ago and $200 million above Street estimates. Revenues in the Pharmacy Services segment increased 20.5%, to $28.8 billion, primarily driven by pharmacy network claim volume and growth in specialty pharmacy. Pharmacy network claims processed during the period increased 22.6% compared to the prior year, thanks in part to net new business. Revenues in the Retail/Long-Term Care segment increased 18.6%, or $3.2 billion, to $20.1 billion, driven by the addition of the LTC operations acquired as part of the Omnicare purchase in August 2015; the addition of the pharmacies and clinics of Target Corporation acquired in December of last year; as well as pharmacy same store sales growth of 4.2% year-to-year. Adjusted earnings per share for the quarter was $1.18, two cents ahead of estimates and compared to $1.14 in 2015’s first quarter. CVS also confirmed its previous adjusted guidance for the full year and expects to deliver $5.73 to $5.88 per share, in the range the Street has for a target.
The shares of CVS offer worthwhile 3- to 5-year price appreciation potential, especially when viewed on a risk adjusted basis. Healthy cash flow generation should enable the company to continue to take advantage of demographic trends and reward shareholders with share buybacks and dividend increases.