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CVS’ Q3 sales and earnings surpass forecasts

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WOONSOCKET, R.I. — Both sales and adjusted earnings exceeded Wall Street’s expectations during the third quarter at CVS Health, buoyed by an increase in store traffic that was driven by prescription growth and COVID-19 vaccinations. As a result, management once again raised its full-year guidance.

Reported, or GAAP, net income for the three months ended September 30 soared 30% to $1.6 billion on a 10% gain in total revenue to $73.8 billion, which was well ahead of analysts’ average forecast of $70.5 billion. Excluding $1.03 billion in pretax special items, adjusted net income leapt 20.3% to $2.62 billion.

On a per share basis, GAAP earnings skyrocketed 29% to $1.20 per diluted share. Adjusted EPS, meanwhile, climbed 18.7% to $1.97 per share, easily beating analysts’ average prediction of $1.79.

“CVS Health has delivered another strong quarter and exceeded expectations,” said president and chief executive officer Karen Lynch in prerecorded comments. “For the third quarter in a row, we are raising adjusted EPS guidance. Throughout 2021, we have made progress executing our strategy to deliver an integrated health care experience centered around the consumer. We sustained strong revenue growth in each of our core businesses, helped improve health outcomes, and reduced costs by broadening access to quality care.”

As Lynch noted, CVS has raised its full-year earnings guidance to a range of $7.90 to $8 per share from its August forecast of $7.70 to $7.80 per share. GAAP EPS are now expected to come in between $6.13 and $6.23 per share, down from $6.35 to $6.45 per share.

Operating income for the quarter dipped 5.8% to $3.06 billion, mainly due to a $431 million goodwill impairment charge related to CVS’ long-term care business and the absence of a $271 million gain on the sale of Coventry Health Care Workers’ Compensation business in the 2020 third quarter.

Taking a closer look at the Retail/LTC segment, which includes CVS Pharmacy, revenue climbed 10% to $25 billion, propelled by the administration of COVID-19 vaccinations and diagnostic testing as well as higher script counts and front-end sales volume, both of which were adversely impacted by the pandemic a year ago. Prescriptions filled rose 8% to 398 million, while COVID-19 vaccinations, diagnostic testing and over-the-counter test kit sales contributed about 40% of the segment’s sales increase. Those factors were partially countered by ongoing pharmacy reimbursement pressure and the impact of recent generic drug ­introductions.

“Front-store sales momentum continued, with revenue growth of 13% versus prior year,” Lynch said. “Front-store sales were led by consumer demand for COVID-19 home testing lots as well as cough and cold products, with year-over-year volume increases across most front-store categories.”

Reported operating income for the retail business fell 9.2% to $1.17 billion, but jumped 22% to $1.72 billion on an adjusted basis.

Lynch also peeked into the retail segment’s future: “We will continue to drive higher engagement with customers as we evolve the format of select CVS locations, creating community health destinations and shifting into three distinct models: sites dedicated to offering primary care services, an enhanced version of HealthHUB with products and services designed for everyday health and wellness needs, our traditional CVS Pharmacy store model that provides prescription services and health and wellness, and other convenient retail offerings.”


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