CVS Health beats on earnings, gets lift from Covid vaccines and prescription volumes

A customer walks towards the entrance of a CVS Health Corp. store in downtown Los Angeles, California, U.S., on Friday, Oct. 27, 2017.

Christopher Lee | Bloomberg | Getty Images

CVS Health on Wednesday beat expectations for third-quarter earnings and raised its outlook for the year, as it got a boost from filling more prescriptions and giving more Covid-19 vaccines.

Shares of the company were up nearly 3% in premarket trading.

The drugstore chain and health insurer said it now expects 2021 adjusted earnings per share to range between $7.90 and $8.00, up from $7.70 to $7.80.

However, the company was weighed down by several one-time expenses, including integration costs related to the acquisition of Aetna and a goodwill impairment charge associated with its long-term care business. Its full-year guidance for earnings per share before adjustments was lowered to between $6.13 and $6.23 from $6.35 to $6.45 previously.

Here’s what the company reported for the three-month period ended Sept. 30, compared with what analysts were expecting, based on a survey of analysts by Refinitiv:

Earnings per share: $1.97 adjusted vs. $1.78 expectedRevenue: $73.79 billion vs. $70.49 billion expected

CVS reported third-quarter net income of $1.59 billion, or $1.20 per share, down from $1.22 billion, or 93 cents per share, a year earlier.

Excluding items, it earned $1.97 per share, more than the $1.78 per share expected by analysts surveyed by Refinitiv.

Total revenues for the period jumped by about 10% to $73.79 billion from $67.06 billion a year earlier, outpacing expectations of $70.49 billion.

More Covid vaccines, hospitalizations

CVS sales got a lift as consumers came to stores for Covid-19 tests and vaccines. The company said it administered 8.5 million tests and 11.6 million shots during the three-month period. That’s a slight drop from the previous quarter, when it gave 17 million vaccines — but its testing increased from more than 6 million.

Signs offering COVID-19 vaccinations are seen outside of a CVS pharmacy in Washington, DC on May 7, 2021.

Mandel Ngan | AFP | Getty Images

Drugstore rival Walgreens Boots Alliance also benefited from Covid-19 vaccines, particularly as many employers mandated the shots. The company said in mid-October that it administered 13.5 million in its most recent quarter, which was nearly double what it had expected.

Both companies plan to capitalize on a new wave of shots: booster vaccines for adults and first-time doses for children ages 5 to 11.

CVS’ pharmacy volumes have also normalized compared with a year ago, as people go to the doctor’s office more regularly and get new prescriptions. Total pharmacy claims processed increased 5.3% on a 30-day equivalent basis during the quarter versus the year-ago period, when Covid vaccines were excluded. That rose to nearly 7% when including vaccines.

On the other hand, the company’s health-care benefits business Aetna saw higher-than-expected costs for Covid-19 treatment and testing — especially as the delta variant of the coronavirus increased cases.

Chief Financial Officer Shawn Guertin said on the company’s earnings call that Covid inpatient admissions to the hospital in August and September matched the peak levels that CVS saw in January 2021. They were about three times the average of the second quarter of 2021, he said.

While consumers are returning to doctor offices and hospitals for health care that they postponed during the early part of the pandemic, he said it did not offset the rising Covid costs.

Guertin said CVS expects those Covid dynamics to reverse next year, with vaccine and testing volumes dropping off and profits from the health-care benefits business improving as it has fewer medical costs from Covid.

He said the company anticipates 2022 adjusted earnings per share of about $8.20.

Weaving together health care

CVS has been weaving together its different health-care offerings. For instance, some of its benefits plans encourage Aetna members to visit MinuteClinics, urgent care locations inside of its CVS drugstores, by charging low or no co-pay. CVS recently launched Aetna Virtual Primary Care, which allows people to visit with a doctor round-the-clock.

CEO Karen Lynch said on an earnings call the company has seen strong repeat rates.

“The consumer has been incredibly challenged by the complexity of the healthcare system and our overall strategy is to make sure that we can provide them access points with lower-costs, higher-quality, with convenience, and overall, engagement, and those factors will help us with the long-term strategy of driving down health-care costs,” she said.

She said the company will share more about its strategy at its investor day on Dec. 9.

As of Tuesday’s close, shares of CVS were up about 33% this year. The stock touched a 52-week high on Tuesday, but closed at $91.15. The company’s market value is $120.28 billion.

Read the company’s press release here.

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