uploads///CVS Health

CVS Beats Q2 Estimates by a Wide Margin


Aug. 7 2019, Updated 10:27 a.m. ET

  • CVS Health beats the second-quarter consensus estimates by a wide margin.
  • The Aetna acquisition is still the growth engine.
  • The strong performance led the company’s management to increase its fiscal guidance.
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CVS beat second-quarter estimates

CVS Health (CVS) announced better-than-expected second-quarter results on Wednesday. The company sustained the first-quarter momentum and beat analysts’ estimates by a wide margin. Notably, CVS Health’s acquisition of Aetna continued to drive its sales and earnings. CVS Health shares were trading 5.4% higher in the pre-market session.

The company posted total revenues of $63.43 billion, which rose 35.2% YoY (year-over-year) and beat analysts’ estimate of $62.65 billion. The addition of Aetna mainly drove the stellar YoY growth. Increased prescription volumes and branded drug inflation continued to support the company’s revenue growth.

However, price compression, the increased generic dispensing rate, and reimbursement pressure continued to hurt the company.

CVS Health’s adjusted operating income rose 55.1%, which reflected benefits from the Aetna acquisition. Moreover, the higher claims volume and improved sourcing in the Pharmacy Services segment supported the growth. However, higher reimbursement pressure and higher wages remained a drag.

The company’s adjusted EPS rose 11.8% to $1.89, which beat analysts’ estimate of $1.69 by a wide margin. Stellar sales and operating income growth supported CVS Health’s bottom-line growth. However, higher interest expenses and the increased outstanding share count remained a drag.

Segmental performance

The Pharmacy Services segment posted total revenues of $34.84 billion—up 4.2% YoY. Continued inflation in branded drug prices and a higher pharmacy claims volume drove the sales. However, price compression and the higher generic dispensing rate remained a drag. The adjusted operating income rose 9.7% due to the higher claims volume and better sourcing.

The Retail and LTC segment’s revenues rose 3.7% to 21.45 billion, which reflected higher prescription volumes. However, continued reimbursement pressure and generic drug introductions restricted the sales growth. The segment’s adjusted operating income fell 8.3% due to more pressure from reimbursement.

The Health Care Benefits segment’s revenues showed phenomenal growth and came in at $17.4 billion. The $16.6 billion YoY growth reflected the Aetna acquisition.

Higher guidance

The strong first-half performance led the company’s management to increase its fiscal profit outlook. CVS raised the adjusted operating income guidance to $15.2 billion–$15.4 billion for 2019. Previously, the company expected to report an adjusted operating income of $15.0 billion–$15.2 billion.

The company’s adjusted EPS is projected to be $6.89–$7.00—up from its earlier guidance of $6.75–$6.90.


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