Sales and earnings exceed expectations
CVS Health (CVS) stock jumped 5.4% on May 1 on stronger-than-expected first-quarter results. CVS Health’s top line continued to grow at a rapid pace thanks to the acquisition of Aetna. Meanwhile, growth in prescription volumes and inflation in branded drugs further supported the net sales growth rate.
CVS Health posted net sales of $61.6 billion in the first quarter, which implies YoY growth of 34.9%. Analysts expected CVS Health to post sales of $60.4 billion.
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The significant boost from the Aetna acquisition pushed adjusted operating income higher. Operating income increased by 56.8% in the first quarter. However, reimbursement pressure, a higher generic dispensing rate, and price compression continued to hurt the company.
Strong sales and stellar growth in operating income drove CVS Health’s better-than-expected earnings in the first quarter. CVS Health’s adjusted earnings of $1.62 per share increased 9.5% on a YoY basis and surpassed analysts’ estimate of $1.50.
Despite the earnings beat, CVS Health’s EPS growth rate decelerated sequentially, reflecting reimbursement pressure. Also, increased interest expenses and higher outstanding share count dragged the earnings growth rate down.
Stock performance so far
Including yesterday’s gain, CVS Health stock is down 12.5% on a YTD basis as of May 1. Rival Walgreens Boots Alliance (WBA) stock has also taken a beating recently due to the higher reimbursement pressure in earnings. WBA stock is down 21.4% so far this year.