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Analysis

Guidance Raised as CVS Revenues Soar to Almost $65B

By Jack O'Brien  
   November 06, 2019

The company's Q3 revenues were primarily driven by its Aetna acquisition, which received final judicial approval in September.

CVS Health notched total revenues of $64.8 billion in Q3, up 36.5% year-over-year, and has raised its year-end financial guidance, according it latest earnings report released Wednesday morning.

The Woonsocket, Rhode Island–based company posted an adjusted operating income of $3.9 billion, an increase of nearly 49%, with an adjusted earnings per share (EPS) of $1.84, up $0.11 compared to Q3 2018.

The highlight of Q3 for CVS was securing final judicial approval for its nearly $70 billion acquisition of Aetna in September. 

Related: CVS-Aetna Deal Secures Final Judicial Sign-Off

Related: CVS Beats Q2 Expectations, as Revenues Swell 35%

Though CVS dealt with financial pressures such as price compression in its pharmacy services segment, reimbursement challenges in its retail and long-term care segment, and increased generic dispensing rates, the Aetna merger was again the main catalyst for revenue growth.

C-suite Perspective:

"Our third quarter results build on the positive momentum we have seen across the company since the beginning of the year. All of our core businesses performed in line with or above expectations, reflecting strong operational execution," Larry Merlo, CEO of CVS, said in a statement. "As a result, we delivered strong growth and generated robust operating cash flow, which enabled us to continue to deliver while returning capital to our shareholders."

Pharmacy revenues increased 6.4% year-over-year for CVS, as total claims processed increased 9.3% on a 30-day equivalent basis. 

Additionally, the company's retail and long-term care segment saw revenues increase by $610 million year-over-year, though its operating income fell by almost $400 million over the same period of time.

Related: Zantac Sales Halted by Walgreens and CVS Over Carcinogen Fears

Looking ahead, CVS projects its year-end adjusted operating income in the range of $15.22 billion to $15.4 billion, an increased, but narrower guidance compared to the one released in Q2. Also, the company ticked up its adjusted EPS guidance to a range of $6.97 to $7.05. 

After the conclusion of Q3, CVS also inked a deal with UPS to test delivery of prescription drugs and retail products through its unmanned drone airlines. 

Related: UPS Drone Services To Take Flight at CVS, Kaiser Permanente, and More

Following the release of CVS' Q3 earnings report, Moody's Investors Service commented that the company "continues to execute well" thanks to its strong financials and debt reduction strategy.

"Script volume growth remains healthy and indicates that the company is gaining market share, and the Health Hubs, although still in the nascent stage, seem to be gaining traction, which is positive for the future operating performance of the company," Mickey Chadha, vice president of Moody's, said in a statement.

Related: CVS Stock is Rising as its Integration Gives it a 'Competitive Advantage'

Chadha added that he expects CVS to continue to improve its credit metrics over the next 12 to 24 months.

Additional CVS Q3 Earnings Report Highlights

  • CVS Health's stock price jumped more than 4.5% during early morning trading. 
  • The company's healthcare benefits segment had revenues that topped $17 billion.

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

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.

Photo credit: San Carlos, CA - Aug. 19, 2016. CVS Pharmacy. Originally named Consumer Value Store, CVS Pharmacy is now a subsidiary of the American retail and health care company CVS Health. (Editorial credit: jejim / Shutterstock.com)


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