CVS tops 3Q profit forecasts, shrinks 2017 expectations

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Posted: Nov 06, 2017 8:35 AM
CVS tops 3Q profit forecasts, shrinks 2017 expectations

CVS Health edged Wall Street third-quarter earnings expectations, but network exclusions, hurricanes and slumping sales from established stores all helped chop the drugstore chain's profit more than 16 percent.

The company also narrowed its forecast for 2017 earnings.

CVS Health runs more than 9,700 retail locations as the nation's second-largest drugstore chain. It also processes more than a billion prescriptions annually as a pharmacy benefits manager, or PBM. But its business has taken a hit as insurers who used to rely on the company to run their prescription coverage have switched to narrow networks that exclude it.

Late last year, CVS was removed from the network of the government's Tricare program, which provides coverage for military personnel and their families. The company also saw another PBM, Prime Therapeutics, enter a retail pharmacy network agreement with Walgreens Boots Alliance Inc., which runs the biggest drugstore chain.

CVS Health said Monday those exclusions were a key reason for its third-quarter profit drop. The company also took a $55-million hit in the quarter from major hurricanes that hit the United States and Puerto Rico.

Overall, CVS Health earnings fell to $1.29 billion from $1.54 billion in last year's quarter, while total revenue climbed more than 3 percent to $46.18 billion. Earnings, adjusted for one-time gains and costs, came to $1.50 per share.

Analysts expected, on average, earnings of $1.49 per share on $46.19 billion in revenue, according to Zacks Investment Research.

The company also said sales from established stores fell more than 3 percent in the quarter. That's an important metric for retailers because it excludes the impact from recently opened or closed locations.

For 2017, CVS Health Corp. now expects annual adjusted earnings of $5.87 to $5.91 per share, a forecast that counts charges due to the hurricanes. That's down from a forecast of $5.83 to $5.93 that it made in August.

Analysts expect, on average, earnings of $5.88 per share, according to FactSet.

The Wall Street Journal recently reported that CVS is in talks to buy the nation's third-largest insurer, Aetna Inc. The deal could be worth more than $60 billion, the newspaper reported, citing anonymous sources.

CVS Health did not comment on the deal in its Monday morning earnings report.

Shares of Woonsocket, Rhode Island-based CVS Health climbed 75 cents to reach $70 in premarket trading Monday, after the company detailed results.

The stock had declined 12 percent since the beginning of the year, while the Standard & Poor's 500 index has increased 16 percent.

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Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on CVS at https://www.zacks.com/ap/CVS

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