CVS Revenue Rises in 1Q, Beats Expectations

(AP Photo/Lynne Sladky, File)
(AP Photo/Lynne Sladky, File)

Specialty drugs and retail expansions boosted CVS Health’s first-quarter revenue by 18.9 percent, helping to offset higher costs and push results above Wall Street expectations.

The nation’s second-largest drugstore chain also confirmed its full-year profit outlook, though second-quarter forecasts are short of expectations.

First-quarter profit fell 6.1 percent during the period to $1.15 billion, or $1.04 per share, mainly on higher acquisition-related costs. Excluding certain expenses, the company earned $1.18 per share.

The results topped Wall Street expectations, with the average estimate of 25 analysts surveyed by Zacks Investment Research for earnings of $1.16 per share.

The Woonsocket, Rhode Island-based drugstore chain and pharmacy benefits manager posted revenue of $43.22 billion in the period, also beating Street forecasts. Twenty-six analysts surveyed by Zacks expected $42.98 billion.

Revenue for the company’s key pharmacy benefits unit rose 20.5 percent to $28.8 billion on a boost in claim volume and the sale of specialty drugs. Specialty drugs are complex medications that treat certain forms of cancer, multiple sclerosis and hepatitis C, among other conditions. They often represent treatment breakthroughs but can cost considerably more than other prescriptions.

The claim volume increase of 22.6 percent comes primarily from new business associated with the year-ago buyout of Omnicare and the expansion into the pharmacy and clinic business of retail giant Target Corp.

Meanwhile, retail revenue rose 18.6 percent to $20.1 billion, also benefiting from the Omnicare and Target additions. Same-store sales growth, another key indicator of retail health, rose 4.2 percent during the quarter. The metric measures sales in stores open at least a year.

CVS Health Corp. leaders have said that they expect growth to pick up in the second half of this year, as the company integrates several important deals. It spent about $10 billion last year to buy pharmaceutical distributor Omnicare and another roughly $1.9 billion for the Target deal.

The Omnicare deal gave CVS Health national reach in dispensing prescription drugs to assisted living and skilled nursing homes, long-term care facilities, hospitals and other care providers. CVS Health has said it expects its return from that deal to grow after it implements programs to manage costs and improve revenue.

The Target business, which CVS Health is integrating, will push East Coast-centric CVS Health’s presence into several markets west of the Mississippi.

The company has also made a priority of adding MinuteClinics to its stores. Industry watchers expect brisk growth in these in-store clinics because they can be more accessible than doctor’s offices, and they offer a less expensive form of care for relatively minor maladies. They also are expected to help ease problems with care access as millions of people are expected to gain insurance coverage over the next few years through the federal health care overhaul.

For the current quarter ending in July, CVS Health expects its per-share earnings to range from $1.28 to $1.31. Analysts surveyed by Zacks had forecast adjusted earnings per share of $1.35. The company reaffirmed its outlook for full-year earnings in the range of $5.73 to $5.88 per share. Analysts expect, on average, earnings of $5.82 per share on $180.74 billion in revenue.

In trading Tuesday afternoon, CVS shares rose $2.61, or 2.6 percent, to $104.06.