CVS Health swings to Q4 loss but still beats Street; forecast disappoints
CVS Health reported mixed results for its fourth quarter and issued a disappointing profit forecast for 2019 as it warned of “headwinds” that need to be addressed.
CVS reported a loss of $419.0 million, or 37 cents per share for the period ended Dec.3, compared to net income of $3.3 billion, or $3.22 per share, in the year-ago period. The loss was driven partly by a $2.2 billion goodwill impairment related to its struggling long-term care Omnicare business, which was challenged by lower occupancy rates at skilled nursing facilities and other factors, and the increase in interest expense due to the 2018 financing associated with the acquisition of Aetna, which was completed in November. Adjusted EPS was $2.14, ahead of the $2.05 per share analysts had estimated.
Total revenue rose to $54.42 billion from $48.3 billion, missing the $54.58 billion analysts had expected. Revenue growth was primarily driven by increased pharmacy network claims in the pharmacy services segment, increased prescription volume in the retail/long term care segment and the addition of Aetna.
“2018 was a milestone year for CVS Health as we successfully completed our transformational merger with Aetna, began effective implementation of our integration strategy, and took important steps toward building the integrated healthcare model that will bring substantial value to our various stakeholders,” said CVH Health president and CEO Larry Merlo. “We strongly believe in the long-term value that the full breadth of our capabilities can provide. Our unique combination will drive above-market growth going forward across all of the enterprise.”
For the full year of 2019, CVS forecasts adjusted earnings of $6.68 to $6.88 per share, below the $7.41 per share the Street had expected. The company expects revenue in the range of $249.86 billion and $254.29 billion versus analysts’ expectations of $247.61 billion.
In addition to the integration of Aetna, CVS is facing challenges related to its Omnicare business, which serves patients in nursing homes and long-term medical-care facilities. The $2.2 billion charge CVS took on the business in the fourth quarter follows a $3.9 billion writedown CVS took on the business in the second quarter.
“2019 will be a year of transition as we integrate Aetna and focus on key pillars of our growth strategy,” Merlo said. “We are fully aware of the need to address the impact of certain headwinds that are having a disproportionate impact in 2019 compared to prior years, and importantly, we are taking comprehensive actions to move past them.”
CVS reported a loss of $419.0 million, or 37 cents per share for the period ended Dec.3, compared to net income of $3.3 billion, or $3.22 per share, in the year-ago period. The loss was driven partly by a $2.2 billion goodwill impairment related to its struggling long-term care Omnicare business, which was challenged by lower occupancy rates at skilled nursing facilities and other factors, and the increase in interest expense due to the 2018 financing associated with the acquisition of Aetna, which was completed in November. Adjusted EPS was $2.14, ahead of the $2.05 per share analysts had estimated.
Total revenue rose to $54.42 billion from $48.3 billion, missing the $54.58 billion analysts had expected. Revenue growth was primarily driven by increased pharmacy network claims in the pharmacy services segment, increased prescription volume in the retail/long term care segment and the addition of Aetna.
“2018 was a milestone year for CVS Health as we successfully completed our transformational merger with Aetna, began effective implementation of our integration strategy, and took important steps toward building the integrated healthcare model that will bring substantial value to our various stakeholders,” said CVH Health president and CEO Larry Merlo. “We strongly believe in the long-term value that the full breadth of our capabilities can provide. Our unique combination will drive above-market growth going forward across all of the enterprise.”
For the full year of 2019, CVS forecasts adjusted earnings of $6.68 to $6.88 per share, below the $7.41 per share the Street had expected. The company expects revenue in the range of $249.86 billion and $254.29 billion versus analysts’ expectations of $247.61 billion.
In addition to the integration of Aetna, CVS is facing challenges related to its Omnicare business, which serves patients in nursing homes and long-term medical-care facilities. The $2.2 billion charge CVS took on the business in the fourth quarter follows a $3.9 billion writedown CVS took on the business in the second quarter.
“2019 will be a year of transition as we integrate Aetna and focus on key pillars of our growth strategy,” Merlo said. “We are fully aware of the need to address the impact of certain headwinds that are having a disproportionate impact in 2019 compared to prior years, and importantly, we are taking comprehensive actions to move past them.”