- CVS reported third-quarter adjusted earnings and sales that beat Wall Street expectations.
- The results come a quarter after CVS launched a major cost-cutting program as part of its efforts to transform itself from a major drugstore chain into a major healthcare company.
- CVS lowered its full-year unadjusted earnings forecast but maintained its full-year adjusted earnings per share forecast.
A woman walks past a CVS Pharmacy in Washington, DC on November 2, 2022.
Brendan Smialowski | AFP | Getty Images
CVS reported third-quarter adjusted earnings and revenue on Wednesday that beat Wall Street expectations, boosted in part by strong sales from the company’s health services business.
CVS posted revenue of $89.76 billion in the quarter, up nearly 11% from the same period last year.
The company reported third-quarter net income of $2.27 billion, or $1.75 per share. By comparison, net loss in the same period last year was $3.40 billion, or $2.59 per share. Excluding certain items such as amortization of intangible assets and capital losses, adjusted earnings per share for the quarter were $2.21.
Here’s what CVS reported for the third quarter compared to Wall Street’s expectations, based on an analyst survey from LSEG, formerly known as Refinitiv:
- Earnings per share: $2.21 adjusted vs. $2.13 expected
- Revenue: $89.76 billion versus expected $88.25 billion
CVS cut its full-year unadjusted profit forecast to a range of $6.37 to $6.61 from $6.53 to $6.75. However, the company maintained its guidance on an adjusted basis, expecting full-year adjusted earnings of $8.50 to $8.70 per share.
The findings come on the final day of a nationwide strike by pharmacy workers at CVS, Walgreens and Rite Aid to protest what they called harsh working conditions that endanger both employees and patients. CVS told CNBC last week that the company is working with employees to address any concerns directly.
They also come a quarter after CVS launched a sweeping cost-cutting program as part of its push to transform itself from a major drugstore chain into a major healthcare company. The company deepened that push earlier this year with its nearly $8 billion acquisition of health care provider Signify Health and its $10.6 billion purchase of Oak Street Health, which operates primary care clinics for seniors .
CVS shares fell more than 3% in premarket trading on Wednesday. Shares of CVS fell nearly 26% for the year through Tuesday’s close, putting the company’s market value at about $88 billion.
The company’s health services segment generated revenue of $46.89 billion in the quarter, an increase of nearly 8% compared to the same quarter in 2022. The division includes CVS Caremark, which negotiates drug discounts with manufacturers on behalf of insurance plans, as well as Health and health insurance companies. Care services provided in medical clinics, via telemedicine, and at home.
According to estimates from StreetAccount, analysts had expected the division’s sales to be $45.19 billion.
CVS said the increase was due in part to the growth of specialty pharmacy services, which help patients suffering from complex medical conditions and requiring specialized therapies. CVS said the company’s recent acquisitions of Oak Street Health and Signify Health also boosted segment results.
The department processed 579.6 million pharmacy claims during the quarter, a slight decline from the same period last year due to a decline in Covid vaccinations and a change in the Medicaid customer contract.
The company’s pharmacy and consumer wellness division posted revenue of $28.87 billion in the quarter, up 6% from the same period last year. This segment dispenses prescriptions at CVS’s retail pharmacies and provides other pharmacy services such as diagnostic testing and vaccinations.
According to estimates from StreetAccount, analysts had expected the division’s sales to be $28.81 billion.
Same-store sales rose 8.8% in the three-month period compared to the same period last year, although not uniformly across the store. In the pharmacy department, same-store sales rose 11.9%, but in the front section they fell 2.2%, due in part to customers purchasing fewer over-the-counter Covid tests.
CVS said a slight increase in prescription volume contributed to the segment’s sales growth. The department filled 407.1 million prescriptions in the quarter, a fraction more than in the same period last year. But same-store prescription volume rose nearly 3.5%, excluding Covid vaccines.
The company has 9,000 brick-and-mortar drugstores across the United States
CVS’s health insurance segment generated $26.30 billion in the quarter, up nearly 17% from the second quarter of 2022. This business includes CVS-owned health insurer Aetna’s Affordable Care Act, Medicare Advantage, Medicaid and Dental plans and vision.
The insurance segment’s medical benefit ratio – a measure of total medical costs paid relative to premiums collected – rose to 85.7% from 83.4% last year. A lower ratio typically indicates that the company collected more in premiums than it paid out in benefits, leading to higher profitability.
According to StreetAccount estimates, analysts had expected a rate of 84.7%.
CVS will hold a conference call with investors at 8 a.m. ET.