Company raises full-year guidance
WOONSOCKET, R.I. — CVS Health on Tuesday reported strong first-quarter sales and earnings that beat analysts’ estimates.
Net income for the period ended March 31 surged 10.5% to $2.22 billion, or $1.68 per share. Adjusted earnings climbed 6.8% from a year earlier to $2.04 per share, well above Wall Street’s forecast of $1.72 per share.
Revenue in the quarter rose 3.5% to $69.1 billion, topping analysts’ prediction of $68.44 billion.
The company raised its full year 2021 earnings per share guidance range to $6.24 to $6.36 from $6.06 to $6.22, and its adjusted EPS guidance range to $7.56 to $7.68 from $7.39 to $7.55 . It confirmed its full year cash flow guidance range of $12.0 billion to $12.5 billion.
“We continue to execute on our strategy while simultaneously managing through a pandemic, helping the country on the road to recovery,” said CVS president and CEO Karen Lynch. “Our unmatched assets and strength of our brand are driving results as we work toward improving care delivery and driving growth.”
Operating income and adjusted operating income increased 3.4% and 2.2%, respectively. The gains were primarily due to growth in the Pharmacy Services and Health Care Benefits segments, partially offset by declines in the Retail/LTC segment.
Interest expense decreased 10.4%, primarily due to lower debt in the quarter. The effective income tax rate was 25.1% for the period, compared to 27.6% for the three months ended March 31, 2020. The decrease was primarily due to the repeal of the non-deductible health insurer fee (HIF) for 2021.
Retail/LTC revenues advanced 2.3%, primarily driven by increased COVID-19 diagnostic testing and vaccinations and brand inflation. These increases were partially offset by lower front store revenues, primarily due to the acceleration of demand in March 2020 as consumers prepared for the pandemic, a weak cough, cold and flu season, continued reimbursement pressure and the impact of recent generic introductions.
Adjusted operating income for the segment decreased 26.7%, mainly because of continued reimbursement pressure and lower front store volume. These declines were partially offset by increased COVID-19 diagnostic testing.
Prescriptions filled remained relatively consistent on a 30-day equivalent basis, with COVID-19 vaccinations and the continued adoption of patient care programs largely offset by the weak cough, cold and flu season, the acceleration of demand in March 2020 and decreased long-term care prescription volume.
Health Care Benefits revenues rose 6.7%, primarily driven by growth in the government services business, partially offset by the unfavorable impact of the HIF repeal.
Adjusted operating income increased 19.5%. The increase in adjusted operating income was primarily driven by improved performance in the government services business and the impact of cost savings initiatives.
The MBR increased 80 basis points, primarily driven by the HIF repeal and lower Medicare risk adjustment revenue. These increases were partially offset by improved performance in Medicaid products and favorable development of prior-years’ health care cost estimates. Medical membership as of March 31 of 23.6 million was up 214,000 from December 31, largely reflecting increases in Medicare and Medicaid products, partially offset by a decline in commercial products.
The segment experienced favorable development of prior-years’ health care cost estimates in its commercial and government services businesses, mainly attributable to fourth quarter 2020 performance. Prior years’ health care costs payable estimates developed favorably by $652 million.
Pharmacy Services revenues grew 3.8%, primarily driven by net new business, growth in specialty pharmacy, product mix and brand inflation, partially offset by continued price compression and the weak cough, cold and flu season.
Adjusted operating income jumped 27.6% for the three months, largely primarily driven by improved purchasing economics and growth in specialty pharmacy, partially offset by continued price compression.
Total pharmacy claims processed slipped 1.0% on a 30-day equivalent basis for the three months, mainly because of the weak cough, cold and flu season, partially offset by net new business.