CVS boosts full-year forecast, posts a big earnings beat

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CVS Health crushed the expectations of Wall Street in the second quarter, with its three businesses posting outcomes that were better than expected. The company has also raised its full-year forecast on Wednesday. 

Here’s what the firm reported against projections from Wall Street, based on Refinitiv’s analyst poll:

  • Earnings per share: $1.89, adjusted, vs. $1.69 expected
  • Revenue: $63.43 billion vs. $62.65 billion expected

In the quarter, brand name medicines’ prices increased, boosting the outcomes of CVS ‘ drugstore and pharmacy’s benefits manager. Both the units of the firm make more money when prices are higher. However, drugmakers have shown reluctance in increasing their prices this year due to political scrutiny.

CVS’ pharmacy covered 19% more prescriptions in this quarter as compared to the same period last year. CVS’ drugstores also increased in terms of sales, all thanks to an increase of people purchasing more health products like cough medicine. 

Aetna, a health insurance company recently acquired by CVS has also overshot the revenue expectations of Wall Street, reaching nearly $17.4 billion in the quarter. CVS intends to prove to its investors that the company can evolve as an innovative health-care brand by working closely with other companies like Aetna. 

CVS reported its second-quarter net income of $1.93 billion, or $1.49 per share, hiked from a loss of about $2.56 billion, or $2.52 per share a year earlier. 

Analysts had expected net sales to hit $62.65 billion. However, net sales by CVS amounted to $63.43 billion, up 35 per cent from $46.92 billion a year ago, mainly due to the acquisition of the health insurance company Aetna. 

The firm now expects full-year adjusted income ranging from $6.89 to $7 per share, up from the $6.75 to $6.90 per share earlier anticipated.

CVS shares in premarket trading increased by about 5 per cent. Larry Merlo, CEO of CVS said these results show their capacity to implement and perform strategic priorities for accelerating enterprise growth as the company strives to fundamentally transform consumer health experience. 

Earlier this year, CVS spooked Wall Street as it steered well below the expectations of analysts. It has boosted the estimate several times since, although the present prediction is still shy of the $7.41 per share originally expected by analysts surveyed by Refinitiv.

Jared Holz, a Jeffries health-care analyst said the numbers for CVS seem quite good in relative terms. Estimates for CVS have dropped substantially over the previous six months on an absolute basis, so compared to where they started at the start of the year, it looks a lot less compelling.

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