People walk by a CVS Pharmacy store in the Manhattan borough of New York City.
Shannon Stapleton | Reuters
CVS Health on Wednesday lifted its earnings outlook for the year, after beating Wall Street’s expectations for the second quarter.
The health-care company said it now expects adjusted earnings per share for the full year to come in between $8.40 and $8.60, compared with its earlier estimate of between $8.20 and $8.40.
Shares of CVS were up about 5% early Wednesday.
Here’s what the company reported for the three-month period ended June 30, compared with what analysts were expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: $2.40 adjusted vs. $2.17 expected
- Revenue: $80.64 billion vs. $76.37 billion expected
On an unadjusted basis, CVS reported net income of $2.95 billion, or $2.23 per share, higher than the $2.78 billion, or $2.10 per share, a year earlier. Revenue of $80.64 billion likewise marked a year-over-year increase, up from $72.62 billion in the same period in 2021.
The results encompass CVS’ several different slices of the health-care business. It has a huge footprint of drugstores, owns insurer Aetna and pharmacy benefits manager CVS Caremark, and provides patient care through MinuteClinics inside of its stores.
CEO Karen Lynch said the company’s strategy of adding more health services is boosting sales and deepening customer relationships.
“Our team is delivering meaningful progress on our strategy as we’re striving to become the nations leading health solutions company,” she said on an earnings call. And she added that the company will “continue to build on this powerful momentum.”
Customers made more frequent visits to CVS stores and bought more when they did, the company said. CVS saw a mid single-digit increase in trips and a mid single-digit rise in average basket size during the quarter, Chief Customer Officer Michelle Peluso said on an earnings call.
Same-store sales increased by 8% compared with the year-ago period, as customers bought Covid at-home test kits and cough, cold and flu medications. That far exceeded an expected drop in same-store sales of 0.3%, according to StreetAccount consensus estimates.
In the pharmacy, same-store sales rose 7.6%. In the front of the store, same-store sales jumped 9.4%.
Some of those gains came from rising prices. CVS has been able to pass along inflation-related higher costs to shoppers in most cases, Peluso said. However, she said the company “wants to make sure there’s value on the shelf at all times for our customers.”
CVS’ private labels are among those budget-friendly options. She said its store brands on average are 20% to 40% cheaper than national brands.
With personalized coupons and its membership program, CarePass, customers can bring prices down even further, Peluso said. The program, which offers discounts, free one- or two-day shipping, and other perks, costs $5 a month or $48 on an annual basis.
CarePass membership is up 26% year over year, she said.
Total pharmacy claims processed gained 3.9% on a 30-day equivalent basis for the three months ended June 30 compared with the prior year. That was driven by an extended cough, cold and flu season compared with the same quarter in 2021.
While sales increased for the quarter, CVS said in a news release that growth was partially offset by a decline in Covid tests and vaccinations, the introduction of new generic drugs, and pressure on pharmacy reimbursements.
CVS administered more than 4 million Covid tests and about 6 million Covid vaccinations in the three-month period, Lynch said on the earnings call. That’s down from more than 6 million tests and more than 8 million shots administered in the first quarter.
One aspect of Covid care has increased, however: Lynch said demand continues to rise for antiviral medications to treat Covid infections.
Pandemic-related services remain a big business for CVS, even as testing and vaccination volumes diminish.
Chief Financial Officer Shawn Guertin said on the call that the company anticipates it will administer nearly 20 million Covid vaccinations this year, with approximately 75% of those already given. He said it expects to provide about 19 million tests and to sell more than 50 million over-the-counter test kits, more than double the number sold in the prior year.
In total, he said those three categories will drive nearly $3 billion of revenue — a drop of about 33% versus the prior year. He said CVS is prepared to spend more in the back half of the year as it prepares for a potential spike in Covid cases.
Plus, Guertin said, pandemic-related items are driving foot traffic and sales in the front of stores. He attributed about 60% of the company’s outperformance in retail to “Covid categories.”
Read the company’s earnings release here.