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CVS shares drop on mixed results, disappointing forecast

20 Feb 19
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CVS Health on Wednesday reported mixed fourth-quarter results and gave its forecast for the year, which fell shy of Wall Street’s expectations.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: $2.14, adjusted, vs. $2.05 expected
  • Revenue: $54.42 billion vs. $54.58 billion expected

For the full year of 2019, CVS forecasts adjusted earnings between $6.68 and $6.88 per share, below the $7.41 per share analysts polled by Refinitiv had expected. The company expects revenue in the range of $249.86 billion and $254.29 billion, according to slides from CVS’ conference call with analysts. The Street had expected $247.61 billion for the year.

Shares of CVS fell 6 percent Wednesday in premarket trading.

“2019 will be a year of transition as we integrate Aetna and focus on key pillars of our growth strategy,” CVS CEO Larry Merlo said in a statement.

CVS reported a fourth-quarter net loss of $421 million, or 37 cents per share, down from a profit of $3.29 billion, or $3.22 per share, a year earlier. This included a $2.22 billion, or loss of $1.99 per share, goodwill impairment charge related to CVS’ long-term care business.

On an adjusted basis, CVS earned $2.14 per share, above the $2.05 per share expected by analysts surveyed by Refinitiv.

Net sales rose 12 percent to $54.42 billion, shy of the $54.58 billion analysts had anticipated.

Same-store sales increased 5.7 percent from the year-ago quarter, when they grew just 0.1 percent. Pharmacy drove the overall gain, with same-store sales up 7.4 percent against weak sales growth a year ago. Front-store sales, which include items like toilet paper and shampoo, grew 0.5 percent.

CVS closed its $70 billion acquisition of health insurer Aetna in November. In addition to the price CVS paid to buy the company, it will need to spend money integrating the insurer and bringing its vision for the combined company to life.

Executives warned investors at the J.P. Morgan Healthcare Conference in January that CVS would face more headwinds than tailwinds this year, such as pricing and reimbursement pressures and the need for increased investment.

Merlo in a statement Wednesday said the company is “fully aware” it will need to address challenges that will affect its financial results this year.

“We understand acutely the importance of balancing near-term execution with longer-term vision, and we are confident that our actions will position us well in 2020 and beyond,” he said.

Last week, CVS unveiled its HealthHUBs, or concept stores that contain fewer traditional drugstore items like greeting cards and more health services like blood draws and health screenings. CVS has said the combined company has a capital expenditure of about $2.6 billion annually it can use to remodel stores.

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