CVS Health in Q2 loss but still beats Street

BY Marianne Wilson

CVS Health’s second-quarter revenue and earnings topped the Street amid growth in prescription volume and its pharmacy benefit management business.

The company swung to a net loss of $2.56 billion, or $2.52 a share in the period ended June 30, from a profit of $1.10 billion, or $1.07 a share, in the year-ago period. Excluding non-recurring items, such as a $3.9 billion goodwill impairment charge related to its long-term care business, adjusted earnings per share were $1.69, above analysts’ estimates of $1.61.

Total revenue grew 2.2% to $46.71 billion, above estimates of $46.32 billion. Same-store sales increased 5.9%.

Revenues in the pharmacy services segment increased 2.8% to approximately $33.2 billion. Revenue from CVS’ retail pharmacy segment rose 5.7% to $20.7 billion, with an 8.3% increase in pharmacy revenue amid increased prescription volume. Front-end sales inched up 0.2%. Same-store prescription volume increased 9.5%. Front-store same-store sales fell 1%, which the chain attributed to softer customer traffic and the shift of the Easter holiday to the first quarter as opposed to the second quarter last year.

“Our solid performance both in the quarter and year-to-date demonstrates our ability to drive value. It also builds upon a strong foundation for a seamless integration of CVS and Aetna with one goal: to transform the consumer health care experience and, by doing so, deliver long-term profitable growth for shareholders,” said CVS Health president and CEO Larry Merlo.

CVS expects its roughly $69 billion acquisition of health insurer giant Aetna to close in the late third quarter or early part of the fourth quarter.

“The genuine enthusiasm and the depth of talent throughout the CVS and Aetna organizations will be key assets as we focus on realizing the potential of our combination,” Merlo said.

Analyst Neil Saunders, managing director of GlobalData Retail, commented that while the healthcare and pharmacy side of the CVS business will allow it to succeed, the company is nowhere near maximizing its potential when it comes to retail.

“Store environments are dingy, inspiration is lacking, merchandising and shop-keeping standards are generally sloppy, and the offer is bitty and fragmented,” Saunders said. “With a little care and attention, CVS could turn these things around, but the company never seems to bother.” For more of his comments, click here.


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