- CVS reported adjusted third-quarter earnings and revenue that beat Wall Street expectations.
- The results come one quarter after CVS launched a sweeping cost-cutting program as part of its drive to transform itself from a large drugstore chain into a major health care company.
- CVS lowered its guidance for full-year unadjusted earnings but maintained its guidance for full-year adjusted earnings per share.
A woman walks past a CVS Pharmacy in Washington, DC on November 2, 2022.
Brendan Smialowski | AFP | Getty Images
CVS on Wednesday reported adjusted third-quarter earnings and revenue that beat Wall Street expectations, lifted in part by strong revenue from the company’s health services business.
CVS reported sales of $89.76 billion for the quarter, up nearly 11% from the same period a year ago.
The company reported net income of $2.27 billion, or $1.75 per share, for the third quarter. That compares with a net loss of $3.40 billion, or $2.59 per share, in the same period a year ago. Excluding certain items such as amortization of intangible assets and capital losses, adjusted earnings per share were $2.21 for the quarter.
Here’s what CVS reported for the third quarter compared to what Wall Street expected, based on a survey of analysts from LSEG, formerly Refinitiv:
- Earnings per share: $2.21 adjusted vs. $2.13 expected
- Income: $89.76 billion vs. $88.25 billion expected
CVS lowered its full-year unadjusted earnings forecast to a range of $6.37 to $6.61, down from a previous range of $6.53 to $6.75. However, it maintained its forecast on an adjusted basis, guiding full-year adjusted earnings of $8.50 to $8.70 per share.
The results come on the final day of a nationwide walkout by pharmacy staff from CVS, Walgreens and Rite Aid to protest harsh working conditions that put both employees and patients at risk. CVS told CNBC last week that the company is engaging with staff to directly address any concerns they may have.
They also come a quarter after CVS launched a massive cost-cutting program as part of its drive to transform itself from a large drugstore chain into a major health care company. The company deepened that pressure earlier this year with its nearly $8 billion acquisition of healthcare provider Signify Health and a $10.6 billion deal to buy Oak Street Health, which operates primary care clinics for seniors.
CVS shares were down nearly 26% for the year through Monday’s close, putting the company’s market value at about $88 billion.
The company’s health services segment generated $46.89 billion in revenue for the quarter, up nearly 8% from the same quarter in 2022. The division includes CVS Caremark, which negotiates drug discounts with manufacturers on behalf of insurance plans, as well as and health care provided in medical clinics, via telehealth, and at home.
Analysts expected the division to bring in $45.19 billion in sales, according to estimates compiled by StreetAccount.
CVS said the increase was due in part to the growth of specialty pharmacy services, which help patients who suffer from complex illnesses and require specialized therapies. The company’s recent acquisitions of Oak Street Health and Signify Health also boosted results in the segment, according to CVS.
The division processed 579.6 million pharmacy claims in the quarter, down slightly from the prior period due to a drop in Covid vaccinations and a change in the Medicaid client contract.
The company’s consumer pharmacy and wellness division reported $28.87 billion in sales for the quarter, up 6% from the prior period. This segment dispenses prescriptions at CVS retail pharmacies and provides other pharmacy services, such as diagnostic tests and vaccinations.
Analysts expected the division to bring in $28.81 billion in sales, according to estimates compiled by StreetAccount.
Same-store sales were up 8.8% in the quarter compared to the same time a year earlier, but not uniformly across stores. Same-store sales jumped 11.9% in the pharmacy department but fell 2.2% at the front of the store, partly as customers cut back on buying over-the-counter Covid tests.
CVS said a slight increase in prescription volume contributed to the segment’s revenue growth. The division filled 407.1 million prescriptions in the quarter, up slightly from the same period a year ago. But same-store prescription volume jumped nearly 3.5%, excluding Covid vaccines.
The company has 9,000 physical pharmacies in the US
CVS’s health insurance segment generated $26.30 billion in the quarter, up nearly 17% from the second quarter of 2022. This division includes CVS-owned health insurer Aetna’s plans for the Affordable Care Act, Medicare Advantage, Medicaid and dentistry and vision.
The insurance segment’s medical benefits ratio — a measure of total medical expenses paid to premiums collected — increased to 85.7 percent from 83.4 percent a year earlier. A lower ratio usually indicates that the company has collected more premiums than it has paid out benefits, resulting in higher profitability.
Analysts had expected that ratio to be 84.7%, according to StreetAccount estimates.
CVS will hold an earnings call with investors at 8 a.m. ET.