CVS results beat expectations, driven by strong healthcare revenues

CVS on Wednesday reported third-quarter adjusted profit and revenue that beat Wall Street expectations, boosted in part by strong revenue from the company’s health services business.

CVS reported revenue of $89.76 billion for the quarter, up nearly 11% from the same period last year.

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, for 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 by LSEG, formerly known as Refinitiv:

• Earnings per share: $2.21 adjusted vs. $2.13 expected
• Income: $89.76 billion versus $88.25 billion expected

CVS lowered its full-year unadjusted earnings forecast to a range of $6.37 to $6.61, from a prior range of $6.53 to $6.75. However, it maintained its guidance on an adjusted basis, pointing to full-year adjusted earnings of between $8.50 and $8.70 per share.

The results come on the final day of a nationwide strike by CVS pharmacy workers, Walgreens And Help with rites to protest what they call harsh working conditions that endanger both employees and patients. 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 sweeping cost-cutting program as part of its transformation from a large drugstore chain to a major health care company. The company furthered that dynamic earlier this year with the nearly $8 billion acquisition of healthcare provider Signify Health and a $10.6 billion deal to buy Oak Street Health, which operates health care clinics. primary care for the elderly.

CVS stock fell more than 3% in pre-market trading Wednesday. Shares of CVS have fallen nearly 26% for the year through Tuesday’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, an increase of nearly 8% from the same quarter of 2022. The division includes CVS Caremark, which negotiates discounts on medicines with manufacturers on behalf of insurance plans, as well as health services. healthcare services provided in medical clinics, via telehealth and at home.

Analysts expected the division to generate revenue of $45.19 billion, according to estimates compiled by StreetAccount.

CVS said the increase was due in part to the growth of specialty pharmacy services, which help patients with complex conditions who require specialized therapies. The company’s recent acquisitions of Oak Street Health and Signify Health also boosted the segment’s results, according to CVS.

The division processed 579.6 million pharmacy claims in the quarter, a slight decrease from the same period last year due to a drop in Covid vaccinations and a Medicaid customer contract change .

The company’s pharmacy and consumer wellness division reported revenue of $28.87 billion for the quarter, up 6% from the same period last year. This segment dispenses prescriptions at CVS’s retail pharmacies and provides other pharmacy services, such as diagnostic testing and immunizations.

Analysts expected the division to generate revenue of $28.81 billion, according to estimates compiled by StreetAccount.

Same-store sales rose 8.8% in the three-month period compared to the same period a year earlier, but unevenly across stores. Same-store sales jumped 11.9% in the pharmacy division, but fell 2.2% in the storefront, partly because customers reduced their purchases of 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 during the quarter, up slightly from the same period last year. But the volume of prescriptions in comparable stores jumped by almost 3.5%, excluding Covid vaccines.

The company has 9,000 brick-and-mortar pharmacies in the United States.

CVS’s health insurance segment generated $26.30 billion in the quarter, an increase of nearly 17% from the second quarter of 2022. This division includes plans from health insurer Aetna, owned from CVS, for the Affordable Care Act, Medicare Advantage, Medicaid, and dental and vision care.

The insurance segment’s medical benefits ratio, a measure of total medical costs paid relative to premiums collected, increased to 85.7% from 83.4% a year earlier. A lower ratio generally indicates that the company collected more in premiums than it paid out in benefits, resulting in higher profitability.

Analysts expected this ratio to be 84.7%, according to StreetAccount estimates.

CVS will host an earnings conference call with investors at 8 a.m. ET.