After 11% profit spike in Q1, CVS outlook for year gets rosy
CVS Health hiked its 2021 forecast and beat Wall Street’s first-quarter expectations as a growing insurance business offset hits the healthcare giant took from a weak cold and flu season.
The company covered more people through Medicaid and Medicare Advantage, and adjusted operating earnings from health insurance jumped nearly 20% in the first quarter to $1.78 billion.
CVS Health said Tuesday that it also delivered more than 23 million COVID-19 tests and 17 million vaccine doses through April, which helped its drugstore business.
But the pandemic has disrupted business at CVS as well. A weak cough, cold and flu season brought on in part by mask wearing and social distancing hurt sales in both the company’s drugstore business and its pharmacy benefits management operations, which run drug plans for big clients like insurers and employers.
CVS Health drugstores also faced a tough sales comparison to last year’s first quarter, when customers stocked up on pharmacy supplies as the pandemic set in.
Sales from the front end, or the area outside the pharmacy, of established drugstores fell more than 11% compared to the first quarter of 2021.
Products that help customers deal with colds and the flu are usually a big factor behind first-quarter sales, said Neil Saunders, managing director of GlobalData.
“While CVS has drawn in customers on the testing and vaccination side, there is little evidence to suggest that this is spilling over into the general retail part of its business,” Saunders said in an email.
CVS Health operates one of the nation’s largest drugstore chains with nearly 10,000 retail locations. It also provides health coverage for more than 23 million people through its Aetna arm.
Overall, the company’s net income jumped nearly 11% to $2.22 billion in the quarter that ended March 31. Earnings adjusted for one-time gains and costs totaled $2.04 per share, and revenue grew more than 3% to $69.1 billion.
That easily beat average expectations of $1.72 per share in earnings on $68.44 billion in revenue, according to a survey by Zacks Investment Research.
CVS Health started 2021 with an earnings forecast that largely fell short of Wall Street expectations. But it said Tuesday that it now expects annual adjusted per-share earnings to range from $7.56 to $7.68.
Analysts are looking for $7.54 per share, on average, according to FactSet.
Shares of Woonsocket, Rhode Island-based CVS Health Corp. climbed more than 2% to $79.60 after markets opened Tuesday and broader indexes slipped.
The stock had already climbed about 14% so far this year, a slightly better performance than the Standard & Poor’s 500 index.