CVS revenue up on drug business strength
Published: Nov 4, 2014
By, MICHAEL CALIA, The Wall Street Journal
CVS Health Corp. posted a stronger-than-expected 9.7% increase in revenue for its third quarter as strength from the pharmacy business offset a decline in front-of-the-store sales that was partly driven by the absence of cigarettes.
Shares rose more than 3% premarket on the strong results.
The company changed its name to CVS Health from CVS Caremark last month just as it sold its last tobacco product, bringing to fruition an initiative to stop selling cigarettes and other tobacco items it started in February. CVS said the loss of tobacco sales weighed on sales in the front of the store.
The retail pharmacy business’s revenue rose 3.1% to $16.7 billion. Overall same-store sales rose 2%, with pharmacy sales rising 4.8%, offsetting a 4.5% decline in front-of-the-store sales.
Beyond its anti-cigarette moves, the company has sought to embrace a broader health-care identity for its business, as it also helps administer benefits and is growing its walk-in medical clinics and specialty-pharmacy services.
The pharmacy services business posted revenue of $22.5 billion, an increase of 16% that was driven by continued growth in specialty-pharmacy sales.
In all, the company posted a profit of $948 million, or 82 cents a share, down from $1.25 billion, or $1.03 a share, a year earlier. Excluding the impact of a pretax loss of $521 million–or 27 cents a share–on the early extinguishment of debt, earnings were $1.15 a share. CVS had projected earnings of $1.11 to $1.14 a share.
Revenue rose 9.7% to $35.02 billion, above the $34.74 billion projected by analysts polled by Thomson Reuters.
For the current quarter, CVS said it expects $1.18 to $1.21 in per-share earnings, compared with analysts’ projections of $1.21 a share.
CVS’s operating expenses jumped 9% to $4.22 billion, while its gross margin narrowed to 18.5% from 18.9% as input costs rose 10% to $28.55 billion.
The company also narrowed its earnings outlook for the year to a range of $4.47 to $4.50 a share, from $4.43 to $4.51 a share.
Write to Michael Calia at email@example.com
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