CVS Health’s solid Q3 leads to raised, narrowed guidance
CVS Health’s third quarter delivered solid results that led the company to raise and narrow its earnings guidance for the year. Total revenue for the quarter was $64.8 billion, an increase of 36.5% over the prior-year period, with earnings per share from continuing operations of $1.17.
The company attributed the revenue growth primarily to the impact of the Aetna acquisition, alongside increased volume and brand price inflation in its retail/long-term care pharmacy and pharmacy services segments. The quarter also saw operating income increase 13.8% from the prior year, with net income increasing 10% during the quarter, which ended Sept. 30.
“Our third-quarter results build on the positive momentum we have seen across the company since the beginning of the year,” said CVS Health president and CEO Larry Merlo. “All of our core businesses performed in line with or above expectations, reflecting strong operational execution. As a result, we delivered strong growth and generated robust operating cash flow, which enabled us to continue to delever while returning capital to our shareholders.”
CVS Health’s retail/long-term care segment saw a 2.9% increase in revenue to $21.3 billion for the quarter, driven largely by higher prescription volume and brand-name drug price inflation and offset by ongoing reimbursement pressure and a higher generics dispensing volume. Total script volume increased by 6.4% on a 30-day equivalent basis over the prior-year period. Front-store sales in the quarter made up 21.5% of the segment’s revenue and increased 1.3% to $4.6 billion due to higher health and beauty product sales, particularly in cough-cold. The company filled a total of 352.3 million scripts in the quarter on a 30-day equivalent basis.
The company’s pharmacy services segment saw revenue up 6.4% over Q3 2018, totaling $36 billion. Total pharmacy claims processed grew by 9.3% on a 30-day equivalent basis, largely as a result of Maintenance Choice offering adoption. The segment’s operating income increased 5.1% for the quarter, which CVS Health said was the result of the addition of Aetna’s mail-order and specialty operations and improved purchasing economics. This was offset by price compression and an increase in intangible asset amortization related to Aetna’s mail-order and specialty pharmacy operations.
The company’s health care benefits segment saw revenue of $16.5 billion and operating income of $962 million. As of Sept. 30. The segment included 22.8 million members.
As a result of a strong quarter, Merlo shared the company’s new guidance for the full year as CVS Health carries out the fourth quarter of its fiscal year.
“Based on strong year-to-date performance, we are raising and narrowing our full-year 2019 Adjusted EPS guidance range to $6.97 to $7.05,” he said. “As we approach the first anniversary of the Aetna acquisition, we are increasingly confident in the strength of our broad and differentiated assets as a combined company and our ability to deliver compelling value to our customers and the communities we serve. Looking ahead, we remain focused on successful execution of our strategic priorities and integration plans to unleash the full potential of our consumer-centric health care model and create value for all stakeholders.”