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Aetna Merger Contributes to $421M Net Loss for CVS

Analysis  |  By Jack O'Brien  
   February 20, 2019

The megamerger with Aetna considerably impacted CVS Health's bottom line in Q4 2018 and for the year overall.

CVS Health's $70 billion acquisition of Aetna, which closed last November but is still subject to review by a federal judge, drove revenue growth last year but also resulted in a significant net loss, according to the company's latest earnings report released Wednesday morning.

Net revenues totalled $54.4 billion for Q4, an improvement of more than $6 billion year-over-year, contributing to total revenues of $194.5 billion for the full year, itself a nearly $10 billion increase. 

However, CVS suffered a net loss of $421 million in Q4, a $3.7 billion year-over-year drop, while posting a $596 million loss for the overall year, a $7.2 billion decline. 

Related: CVS-Aetna Nears Final Judgment Amid Rising Scrutiny of Vertical Deals

Additionally, the company's operating income for Q4 was $824 million, a decline of $2.3 billion, as the full year operating income fell to just over $4 billion, a $5.5 billion drop. 

To top it off, CVS also expects its earnings per share (EPS) for 2019 to be lower than originally projected, posting in a range between $4.88 and $5.08 per share.

The company's adjusted EPS guidance for 2019 is set between $6.68 and $6.88 per share, down from the guidance included in Q3 which ranged between $6.98 to $7.08 per share.

Related: CVS Health's Q3 Earnings Come Ahead of Aetna Merger Closing


"With the completion of the Aetna acquisition, we have set the stage for CVS Health to excel in a market that is rapidly transforming,"  Larry Merlo, CEO of CVS Health, said in a statement. "We strongly believe in the long-term value that the full breadth of our capabilities can provide. Our unique combination will drive above-market growth going forward across all of the enterprise. Maintaining our focus on communitylevel products and services will drive meaningful value for both consumers and payors, while improving our bottom line and the value we return to shareholders. Ultimately, our open platform model allows us to meet the needs of all payors with newly created products and services. We’re more excited than ever about the opportunities that lie ahead."

CVS' Health Care Benefits segment, which accounts for the former Aetna Health Care segment, recorded $5.5 billion in revenues, $276 million in operating income, and membership of 22.1 million from the time of the merger closing on November 28 through the end of 2018.

While CVS' revenues were the positive highlight of the Q4 earnings report, the company stated that these were boosted by "increased prescription volume and branded drug price inflation" while seeing an offset resulting from a combination of reimbursement challenges and new generic drugs on the market.

To that end, total prescription volume on a 30-day basis grew 8.6% during Q4 and 8.8% for the full-year 2018. 

Related: Threats to Hospitals Emerging Already From CVS-Aetna Combination

Another area of headwinds for CVS has been the longterm care (LTC) business, which derived 23% of total revenues from front store prescription drug revenues.  

CVS stated that industry-wide challenges have continued to plague the LTC market, which the company entered through its acquistion of Omnicare in 2015. However, the company stated in its earnings report that this was not above the level of challenge they had originally expected to face when the acquisition closed. 

Following CVS' earnings call, its stock dropped sharply, falling by 8.75% during early morning trading. 


  • CVS' cash flows from operations totalled $8.9 billion in 2018, with a free cash flow of $6.8 billion, down from $7 billion in Q3. 
  • In Q4, CVS had an EPS loss of $0.37 per share and a $0.57 EPS loss for the entire year. 
  • Pharmacy revenues in Q4 were $34.2 billion, up from $33.8 billion in the prior quarter.

For complete financial information, review CVS Health's filing with the Securities and Exchange Commission.

Jack O'Brien is the Content Team Lead and Finance Editor at HealthLeaders, an HCPro brand.

Photo credit: Orlando, Florida - December 24, 2016: Signage of CVS pharmacy in front of the store. - Image / Editorial credit: Lester Balajadia /


While the Aetna merger played a role in rising revenues by 12.5% for CVS Health in the last quarter of 2018, it also hampered some crucial metrics.

CVS suffered a net loss of $421 million in Q4 2018 and $596 million during the full year.

However, CEO Larry Merlo said he believes CVS' acquisition of Aetna provides the company with "long-term value" in a rapidly transforming market. 

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