Income · Stocks to Consider and Updates

CVS Posts Strong Results; Raises Guidance

Woonsocket, Rhode Island-based CVS Health (NYSE: CVS – $70.56) reported a stronger-than-expected adjusted profit in the third quarter and raised its outlook for earnings. The company reported net income of $1.53 billion compared with $1.39 billion a year ago. Excluding certain items, CVS posted an adjusted profit of $1.84 a share compared to an adjusted $1.73 a year ago. Analysts were expecting $1.77. Revenue rose to $64.81 billion from $47.49 billion a year earlier. Analysts had expected $63.01 billion in revenue for the quarter. CVS said its pharmacy benefits management segment, which offers pharmacy benefit services to employers, health plans and employee groups, recorded revenue of $36.02 billion in the quarter, up about 6% versus a year ago. Its retail business, filling prescription medications and selling a range of merchandise, saw revenue increase 3% to $21.47 billion. Prescription volumes grew 6.4% from a year earlier. The company’s health-care benefits business, housing Aetna, reported revenue of $17.18 billion. Shares have recovered somewhat of late and are higher by nearly 5% in today’s trading following the earning’s news.

       Looking ahead, CVS said it now expects to post an adjusted profit between $6.97 and $7.05 a share for the year, compared with its previous outlook of between $6.89 and $7 a share. The Aetna merger separates CVS from competitors as it is a far more complete healthcare provider than most. The synergies from the marriage, meanwhile, appear ample. It may have stretched near term finances some, but the company’s cash flows remain healthy and should enable leadership to address the balance sheet; reward shareholders over the long-term; and remain aggressive on the M&A front. The 3% dividend yield adds to the stock’s total return potential.

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