CVS Q1 crushes Street; to expand new store format
CVS Health Corp. came out of the gate running in its first quarter with profit, revenue and same-store sales that beat expectations, and lifted its full-year outlook.
Net income rose to $1.42 billion, or $1.09 a share, in the quarter ended March 31, from $998 million, or 98 cents a share, in the same period a year ago, as the company’s newly acquired Aetna health insurance business gave a boost to results. Adjusted EPS came to $1.62, easily topping analysts’ estimates of $1.50.
CVS’ revenue rose 34.8% to $61.65 billion, above estimates of $60.38 billion. Same-store sales rose 3.8%, much higher than expected. Pharmacy same-store rose 4.9% and front-end same-store sales inched up 0.9%.
“Following the close of our Aetna acquisition in late November, our first full quarter of combined operations was a success in many ways,” said CVS Health president and CEO Larry Merlo. “In the quarter we continued to advance our integration efforts while beginning to launch new innovations such as our HealthHub concept stores.”
The company said it is planning to close 46 underperforming stores in the second quarter. CVS is looking to expand its HealthHub store pilot in Houston from three locations to additional sites in the city. The format allocates 20% of the space to health services and includes community spaces, with “wellness rooms” available for CVS professionals and community partners to host group events, including health classes, nutritional seminars, and benefits education.
The stores are performing “at or above” CVS’ expectations, so the company will expand them and “fill out the Houston market, Merlo told investors on CVS’ earnings call. The company plans to announce additional expansions of the HealthHub in the next two months.
“We are ready to complete the Houston market in the coming weeks,” Merlo told analysts. “Bottom line: We are excited about the opportunity.”
CVS Health revised its fiscal 2019 guidance, which it now expects to have operating income between $11.7 billion and $12.1 billion, compared with its prior range of $11.8 billion to $12 billion. It narrowed its EPS guidance to between $4.90 and $5.05 from between $4.88 and $5.08.
“With our differentiated collection of healthcare assets we are uniquely positioned to lead the transformation of the U.S. health care system,” Merlo said. “We remain relentlessly focused on creating value for clients and customers while driving both near and longer-term returns for our shareholders.”
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