CVS Health’s profit sank 17 percent in the first quarter as the drugstore chain started feeling the loss of some big customers, but it still beat Wall Street expectations.
Net income fell to $952 million in the quarter after its pharmacies were excluded from some prescription coverage networks. One big loss was the government’s Tricare program, which provides coverage for military personnel and their families.
CVS Health also saw a slump in sales outside the pharmacy area of its drugstores, but the company’s pharmacy benefits management business helped counter that.
CEO Larry Merlo called 2017 a “rebuilding year” Tuesday in a company release. But he said that CVS also aims to return to healthy growth levels.
CVS Health runs nearly 9,700 retail locations, counting the pharmacy and clinic businesses it operates for retail giant Target Corp. That total is second only to Walgreens. CVS Health also processes more than a billion prescriptions annually as a pharmacy benefits manager, or PBM.
PBMs run prescription drug plans for employers, insurers and other customers. They process mail-order prescriptions and handle bills for prescriptions filled at retail pharmacies.
Revenue from the company’s PBM side climbed more than 8 percent to top $31 billion in the first quarter.
Sales from established drugstores fell 4.7 percent in the first quarter, due partly to a drop in prescriptions and more generic drugs. An increase in generic drugs can hurt drugstore revenue but help the bottom line because pharmacies typically make a much higher profit margin on those prescriptions.
CVS Health, like other drugstore chains, also has struggled with a slump in customer visits to its stores.
Revenue from stores open at least a year is considered a key indicator of a drugstore chain’s financial health because it eliminates the impact of stores that have recently opened or closed.
CVS Health also recorded a $199 million charge in the quarter after closing 60 stores. The company also took a hit compared to last year because the 2016 quarter had an extra day due to leap year.
Overall, the Woonsocket, Rhode Island, company reported earnings adjusted for one-time costs of $1.17 per share on $44.51 billion in revenue in the first quarter.
Analysts expected, on average, earnings of $1.10 per share on $44.24 billion in revenue, according to Zacks Investment Research.
CVS Health also again reaffirmed its forecast for 2017 adjusted earnings ranging between $5.77 and $5.93 per share.
Analysts expect, on average, earnings of $5.86 per share in 2017, according to FactSet.
Shares of CVS Health Corp. climbed $1.34 to $83.30 in premarket trading after the company released results.
The stock has climbed 4 percent so far this year, while the Standard & Poor’s 500 index has risen 6.7 percent.