CVS Health's pharmacy services business fueled a nearly 10% revenue gain for the third quarter, with adjusted earnings per share exceeding analysts' forecast.

CVS noted, however, that its retail drug store business saw third-quarter sales dip in the front end as a result of its decision to pull tobacco products from its shelves as of early September.

WOONSOCKET, R.I. — CVS Health Corp.’s pharmacy services business fueled a nearly 10% revenue gain for the third quarter, with adjusted earnings per share exceeding analysts’ forecast.

CVS Health Corp.’s pharmacy services business fueled a nearly 10% revenue gain for the third quarter, with adjusted earnings per share exceeding analysts’ forecast.

CVS noted, however, that its CVS/pharmacy retail drug store business saw third-quarter sales dip in the front end as a result of its decision to pull tobacco products from its shelves as of early September.

The company said Tuesday that for the three months ended Sept. 30, total sales climbed 9.7% to $35 billion from $31.9 billion a year earlier.

In the retail pharmacy segment, third-quarter sales rose 3.1% to $16.7 billion from $16.2 billion. Same-store sales edged up 2% year over year, reflecting a 4.5% decrease in the front end and a 4.8% increase in the pharmacy.

Comparable-store sales in the front end would have been about 480 basis points higher in the quarter if tobacco and the estimated related basket sales were excluded from the three months ended Sept. 30, 2014 and 2013, according to CVS. The company said comparable front-end sales were negatively impacted by softer customer traffic, partially offset by growth in basket size.

Comp-store prescription count was up 5.1% on a 30-day equivalent basis during the third quarter. CVS said comparable pharmacy sales were negatively impacted by 190 basis points from introductions of new generic drugs and by another 190 basis points from the implementation of the Specialty Connect program, which transitioned all specialty drug prescriptions to the pharmacy services segment, since they are processed via the company’s specialty mail-order pharmacies. CVS noted that Specialty Connect had a greater effect on sales than prescription volumes because of the higher dollar value of specialty medications.

Sales in the pharmacy services, or pharmacy benefit management (PBM), segment surged 15.7% to $22.5 billion in the third quarter from $19.5 billion a year earlier. CVS said the gain stemmed from growth in specialty pharmacy business, including the acquisition of Coram and the impact of Specialty Connect, as well as a 4.3% increase in the volume of pharmacy network claims. Mail choice claims processed during the quarter fell 1.3% due to a decline in traditional mail volumes, partially offset by growth in the Maintenance Choice program, CVS reported.

The generic dispensing rate rose 180 basis points to 82.5% in the pharmacy services segment and 83.3% in the retail pharmacy segment compared with a year ago.

"I’m very pleased with our strong results in the third quarter, which reflect better-than-expected revenue growth across the enterprise and expanding retail gross margins," president and chief executive officer Larry Merlo said in a statement. "The 2015 PBM selling season continued to be highly successful, with a significant number of new business wins across all lines of business. We also continued to deliver substantial free cash flow, enabling us to return more than $3.7 billion to our shareholders year to date. We are well on track to return more than $5 billion to our shareholders through dividends and share repurchases for the full year 2014."

On the earnings side, CVS posted net income of nearly $950 million, or 81 cents per diluted share, in the third quarter, compared with just over $1.2 billion, or $1.02 per diluted share, in the prior-year period. CVS attributed the decrease mainly to a $521 million pretax loss, or 27 cents per share, on the early extinguishment of debt. Excluding the loss on the early extinguishment of debt and a $72 million pretax gain (4 cents per share) from a legal settlement in 2013, 2014 third-quarter adjusted EPS rose 9% to $1.15.

CVS added that third-quarter adjusted EPS for 2014 and 2013 excludes $126 million and $124 million, respectively, of intangible asset amortization related to acquisition activity.

Analysts, on average, forecast CVS’ 2014 third-quarter adjusted EPS at $1.13, with estimates ranging from a low of $1.12 to a high of $1.16, according to Thomson Financial.

For full-year 2014, CVS narrowed its earnings projections. Adjusted EPS is now estimated at $4.47 to $4.50, compared with its previous forecast of $4.43 to $4.51, excluding the 27-cents-per-share loss on early extinguishment of debt. Including that debt loss, diluted EPS from continuing operations is projected at $3.93 to $3.96.

The company pegs fourth-quarter EPS at $1.18 to $1.21 on an adjusted based and at $1.12 to $1.15 on a GAAP (Generally Accepted Accounting Principles) basis.

Analysts’ consensus estimate for CVS’ fourth-quarter adjusted EPS is $1.21, with projections running from a low of $1.18 to a high of $1.28, according to Thomson Financial. The average estimate for CVS’ full-year adjusted EPS came in at 4.49, with the forecast ranging from a low of $4.46 to a high of $4.53.

CVS said it opened 45 new retail drug stores, acquired 33 drug stores and closed four drug stores during the third quarter, as well as relocated 13 drug stores. As of Sept. 30, the company operated 7,779 retail drug stores in 47 states, the District of Columbia, Puerto Rico and Brazil.