CVS Health beat second-quarter earnings expectations and nudged its 2016 forecast higher after the drugstore chain and pharmacy benefits manager reaped gains from a couple of deals and its sales of pricey specialty drugs rose.
The Woonsocket, Rhode Island, company said Tuesday that acquisitions of Omnicare Corp. and a separate purchase of the pharmacy and clinic business of retail giant Target Corp. helped revenue for its retail/long-term care business. Meanwhile, new business and specialty drug claims pushed sales up 21 percent to $29.5 billion in the company’s pharmacy benefits management segment.
CVS Health Corp. runs the nation’s second-largest drugstore chain and has more than 9,600 locations globally, counting the Target business. It also runs the second-largest pharmacy benefits management business, which operates prescription drug plans for employers, insurers and other customers.
The company said revenue from established stores — a key metric for retailers — rose 2 percent during the second quarter. That came even though sales from store areas outside the pharmacy took a hit because Easter fell in the first quarter this year, compared to the second quarter of 2015. Holidays like Easter are important sales generators for drugstores.
Overall, CVS Health’s earnings plunged 27 percent to $924 million in the quarter that ended June 30. That was due mainly to a $542-million loss on the early retirement of some debt and $81 million in acquisition-related costs.
Earnings, adjusted for non-recurring costs and amortization costs, came to $1.32 per share.
Analysts expected, on average, earnings of $1.30 per share, according to Zacks Investment Research.
CVS Health posted revenue of $43.73 billion in the period, which fell short of the average Wall Street expectation of $44.23 billion.
The company also narrowed and raised its full-year earnings forecast to a range of $5.81 to $5.89 per share, up from a range $5.73 to $5.88 per share, which the company had announced last December.
Company leaders have said they expected CVS Health’s growth to pick up in the second half of this year, as the company integrated its acquisitions. It spent about $10 billion last year to buy pharmaceutical distributor Omnicare and another roughly $1.9 billion to take over the Target’s business.
The Omnicare deal gave CVS Health national reach in dispensing prescription drugs to assisted living and skilled nursing homes, long-term care facilities, hospitals and other care providers. The Target business pushes East Coast-centric CVS Health’s presence into several markets west of the Mississippi.
For the current quarter ending in October, CVS Health expects its per-share earnings to range from $1.55 to $1.58. Analysts surveyed by Zacks had forecast adjusted earnings per share of $1.55.
CVS shares climbed $2.51, or 2.7 percent, to $96 in premarket trading.
That stock price had fallen slightly more than 4 percent since the beginning of the year, while the Standard & Poor’s 500 index has risen 6 percent.
Elements of this story were generated by Automated Insights using data from Zacks Investment Research. Access a Zacks stock report on CVS at http://www.zacks.com/ap/CVS.
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