Earnings Preview: Strength in offerings will drive growth for CVS Health

CVS Health Corporation (CVS) is scheduled to report earnings results for the third quarter of 2018 on Tuesday, November 6, before the market opens. Analysts expect the company to report earnings of $1.71 per share on revenues of $47.1 billion, reflecting year-over-year increases of 14% and 2%, respectively. The company has consistently topped earnings estimates over the past four quarters.

CVS is expected to see strength in its Pharmacy Services business in the third quarter, with particular focus on the specialty business. The company’s specialized offerings provide opportunities for user base growth.

In the Retail/LTC segment, the momentum in PBMs is expected to continue but growth is expected to be negatively impacted by headwinds in the Long-Term Care business. Overall, new products and higher drug prices are expected to benefit CVS, even in a challenging pricing environment, but reimbursement pressure and generic competition will continue to impact the business.

CVS Health swings to loss in Q2

Earlier this month, CVS reached an agreement with the Justice Department with regards to its acquisition of Aetna (AET), which it expects to complete in the early part of the fourth quarter of 2018. Under the agreement with the DoJ, Aetna has agreed to divest its Medicare Part D prescription drug plans to a subsidiary of WellCare Health Plans Inc. (WCG).

Following the acquisition, CVS will expand its board to include three Aetna directors. The company also appointed Eva C. Boratto as the new CFO to succeed Shawn M. Guertin.

In the second quarter, CVS reported results that surpassed market expectations. Revenue rose 2.2% to $46.7 billion and adjusted EPS grew 27% to $1.69. Both the Pharmacy Services and Retail/LTC segments posted revenue increases.

For the third quarter, CVS has guided for GAAP EPS of $1.29 to $1.34 and adjusted EPS of $1.68 to $1.73. For the full year of 2018, the company expects GAAP EPS of $1.40 to $1.50 and adjusted EPS of $6.98 to $7.08.

Over the past three months, CVS Health’s shares have gained over 14% and if the quarterly results beat expectations, the stock is likely to see a lift.

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