CVS Profit Grows on Higher Sales of Prescription Drugs -- 3rd Update
10 February 2016 - 4:18AM
Dow Jones News
By Chelsey Dulaney and Paul Ziobro
CVS Health Corp. reported higher profit and sales in its fourth
quarter, as rising sales of prescription drugs offset a slight drop
in sales in the front-end of its stores, where traffic continues to
erode.
The quarter was broadly in line with Wall Street expectations,
as CVS drugstores and its large pharmacy benefits management
business continued to cover more patients and dispense more drugs.
In Tuesday morning trading, CVS shares rose 2% to $91.51.
The results were also boosted by two recent acquisitions that
allow CVS to cover more patients: Omnicare Inc., which dispenses
drugs to places like nursing homes; and Target Corp.'s pharmacy
business, which gives CVS nearly 1,700 more locations. As both
those acquisitions become integrated, CVS plans to market them
aggressively to help sign up more clients to its network.
Building scale is one part of CVS's answer to falling
reimbursement rates as more patients are covered through federal
Medicare and Medicaid programs, which carry lower margins than
private insurers.
Still, private insurers are trying to squeeze more costs out of
their drug plans as well. The health insurer Anthem Inc. last month
said it would drop its longtime benefits manager Express Scripts
Holding Co. unless it could deliver more than $3 billion in savings
on drug prices.
The rare public dispute puts the valuable contract up for grabs.
CVS executives declined Tuesday to comment on their plans to pursue
it, but did say that Anthem's move hasn't affected negotiations
with other clients. "We're not really seeing any repercussions or
halo to pricing in the marketplace from that event, but I think it
continues to be competitive," Jonathan Roberts, head of CVS's
Caremark business, said on Tuesday's earnings call.
For the period ended Dec. 31, CVS reported a profit of $1.5
billion, or $1.34 a share, up from $1.32 billion, or $1.14 a share,
a year earlier. Quarterly revenue rose 11% to $41.15 billion, after
eliminating inter-segment sales. Analysts were forecasting revenue
of $41.13 billion in revenue.
Sales in its retail business increased 12.5% to $19.9 billion,
with about half of that growth owing to CVS's recent acquisition of
Omnicare Inc.
Sales at stores, excluding newly opened or closed locations,
rose 3.5%, though front-of-store sales edged down 0.5%. The decline
in the front-end, where CVS sells over-the-counter medicine, snacks
and beauty products, comes as CVS focuses more on deals targeted at
specific customers using data from a loyalty program while
downplaying broader discounts from its circulars.
The retail pharmacy sales remained strong. Both pharmacy sales
and prescription volumes, on a same-store basis, rose 5%.
The Caremark and other pharmacy-services businesses posted a 11%
increase in sales to $26.5 billion, driven by growth in selling
specialty drugs and a 7.2% increase in processed claims.
While backing its guidance for this year, CVS projected
first-quarter earnings of $1.14 to $1.17 a share, just below
analyst expectations of $1.18 a share, according to Thomson
Reuters.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com and Paul
Ziobro at Paul.Ziobro@wsj.com
(END) Dow Jones Newswires
February 09, 2016 12:03 ET (17:03 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Target (NYSE:TGT)
Historical Stock Chart
From Apr 2024 to May 2024
Target (NYSE:TGT)
Historical Stock Chart
From May 2023 to May 2024