CVS Health Gets Bump After Reporting Second-Quarter Adjusted Earnings

CVS Health (CVS) got a boost on Wednesday morning after reporting second-quarter adjusted earnings and sales that beat expectations.

Second-quarter adjusted earnings came in at $1.69 a share, topping forecasts from Capital IQ for $1.61 on a normalized basis. The company said GAAP loss was $2.52 a share due to a one-time $3.9 billion, or $3.85 per share, goodwill impairment charge related to the long-term care business.

Sales rose 2.2% to $46.7 billion, topping forecasts for $46.3 billion, while same-store prescription volume grew 9.5%, CVS said. The company cut its fiscal-year GAAP earnings outlook to $1.40 to $1.50 from $5.11 to $5.32, and narrowed its earnings guidance to $6.98 to $7.08 from $6.87 to $7.08, in line with forecasts for $7.

CVS said in the third quarter it expects GAAP operating profit to fall to 4.5% to 7%, and adjusted consolidated operating profit to decline to 2.5% to 5%. The company also expects GAAP diluted earnings of $1.29 to $1.34 a share, and adjusted earnings of $1.68 to $1.73 per share. The Street view was for GAAP earnings of $1.39 and normalized earnings of $1.75.

Shares were up 2.7% in early trading on Wednesday.

Chief Executive Larry Merlo said the strong quarterly results “upon a strong foundation for a seamless integration of CVS and Aetna (AET) with one goal: to transform the consumer health care experience and, by doing so, deliver long-term profitable growth for shareholders.”

CNBC reported last month that the Department of Justice wouldn’t block the proposed merger between CVS and Aetna, saying investigators didn’t find anti-trust issues with the deal.

Revenue in CVS’s pharmacy services segment rose 2.8% to about $33.2 billion in the three months that ended on June 30.

“This increase was primarily driven by growth in pharmacy network and mail choice claim volume as well
as brand inflation, partially offset by continued price compression and increased generic dispensing,” CVS said in a statement on Wednesday.

Pharmacy network claims processed in the quarter rose 5.9%, on a 30-day equivalent basis, to 398.2 million, compared to 376.0 million in the same quarter of the prior year. The increase in volume was primarily due to an increase in net new business, the company said.

On a 30-day equivalent basis, mail choice claims processed jumped 9.5% to 71.9 million from the same quarter of the prior year. The increase in mail choice claim volume was driven by the continued adoption of CVS’s maintenance choice offerings and an increase in specialty pharmacy claims.

Retail segment revenue gained 5.7% to about $20.7 billion in the quarter, with the gain due to continued adoption of patient care programs, alliances with PBMs and health plans and inclusion in a number of additional Medicare Part D networks this year.