Revenues at retail drugstore chain and pharmacy benefits manager CVS Health (NYSE: CVS – $72.31) rose 5.3% to $48.4 billion in the fourth quarter, exceeding the $47.5 billion expected by Wall Street. Net revenues for all of 2017, increased 4.1% to approximately $184.8 billion. Revenues in the Pharmacy Services Segment increased 9.3%, primarily driven by growth in pharmacy network and specialty pharmacy volume as well as brand inflation, partially offset by continued price compression and increased generic dispensing. Revenues in the Retail/Long Term Care Segment increased 0.3% to approximately $20.9 billion helped by an increase in same store prescriptions of 2.5% and brand inflation, partly offset by an increase in the generic dispensing rate and continued reimbursement pressure. Front store same store sales declined 0.7%, positively impacted by seasonal cough and cold product sales and overall basket size, which offset weakness in softer customer traffic and efforts to rationalize promotional strategies. Excluding tax savings, the company earned $1.92 per share, beating analysts’ average estimate of $1.89.
Elsewhere, the company said it is in “constructive and positive” talks with federal authorities reviewing its proposed acquisition of Aetna. The Justice Department last week asked for more information on the deal, pushing back the deadline to rule on the tie-up, but “nothing has surfaced that came as a surprise and things are moving along as planned”. CVS also said it would use part of a $1.2 billion savings from the new U.S. corporate tax law to increase hourly pay for its workers. Management updated its full-year forecast for adjusted operating profit to a range of up 1.5% to down 1.5%. That compared with previous guidance of growth in a range of 1% to 4%. Shares of CVS have become riskier than most conservative investors are willing to tolerate and, indeed, this is a position that needs to be watched.