CVS Health posts upbeat Q1 earnings, Q2 forecast

CVS Health Corporation (NYSE: CVS) reported a 43% jump in earnings for the first quarter of 2019 helped by the Aetna acquisition as well as increased volume and brand name drug price inflation in both the Pharmacy Services and Retail/LTC segments. The results exceeded analysts’ expectations. The company guided second-quarter adjusted earnings above consensus estimates while lifting its adjusted earnings outlook for the full year 2019.

Net income climbed by 43% to $1.43 billion and earnings increased by 11% to $1.09 per share. The growth in EPS was lower than the net income growth due to the increase in weighted average shares outstanding. Adjusted earnings rose by 9% to $1.62 per share.

Revenues grew by 35% to $61.65 billion, driven by the Aetna Acquisition, as well as increased volume and brand name drug price inflation in both the Pharmacy Services and Retail/LTC segments. This was partially offset by continued price compression in the Pharmacy Services segment, reimbursement pressure in the Retail/LTC segment and an increased generic dispensing rate.

Looking ahead into the second quarter of 2019, the company expects earnings in the range of $1.20 to $1.24 per share and adjusted earnings in the range of $1.68 to $1.72 per share.

For the full year 2019, the company narrowed its earnings guidance to the range of $4.90 to $5.05 per share from the prior range of $4.88 to $5.08 per share. The adjusted earnings outlook is lifted to the range of $6.75 to $6.90 per share from the previous estimate range of $6.68 to $6.88 per share. The company confirmed its cash flow from operations outlook in the range of $9.8 billion to $10.3 billion.

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For the first quarter, revenue from the Pharmacy Services segment rose by 3.1% primarily due to brand name drug price inflation as well as increased total pharmacy claims volume. Total pharmacy claims processed increased 2.8% on a 30-day equivalent basis primarily driven by net new business and the continued adoption of Maintenance Choice offerings.

Revenue from Retail/LTC segment grew by 3.3% primarily driven by increased prescription volume and brand name drug price inflation. Total prescription volume grew 5.5%, on a 30-day equivalent basis, driven mainly by the continued adoption of patient care programs, collaborations with PBMs and its preferred status in a number of Medicare Part D networks.

Revenue from Health Care Benefits segment soared by $16.6 billion primarily driven by the Aetna acquisition. This reflected strong membership growth in the Health Care Benefits segment’s Medicare products. Medical membership as of March 31, 2019, increased by 3.3% compared with December 31, 2018, reflecting increases in Medicare, Commercial ASC, and Medicaid products, partially offset by declines in Commercial Insured products.

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Effective for the first quarter of 2019, CVS Health realigned the composition of its segments to correspond with changes to its operating model and how the business is managed. As a result, the company’s SilverScript Medicare Part D prescription drug plan moved from the Pharmacy Services to the Health Care Benefits segment. Also, CVS Health moved the mail order and specialty pharmacy operations of Aetna from the Health Care Benefits to the Pharmacy Services segment.

Shares of CVS Health ended Tuesday’s regular session up 0.72% at $54.38 on the NYSE. Following the earnings release, the stock inched up over 5% in the premarket session.

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