CVS Health on Wednesday reported a strong second quarter and raised its outlook for the year, saying it is better positioned to weather the pandemic because of its diverse business, which includes its large drugstore chain and health benefits.
The health-care company beat analysts’ expectations for earnings and revenue in the fiscal second quarter.
Shares of the company were down nearly 1% to $64.40 at market close. They had initally jumped by more than 6% early Wednesday in premarket trading, just after the company released earnings.
“The environment surrounding COVID-19 is accelerating our transformation, giving us new opportunities to demonstrate the power of our integrated offerings and the ability to deliver care to consumers in the community, in the home and in the palm of their hand which has never been more important,” CVS Chief Executive Larry Merlo said in a news release.
Here’s what the company reported for the quarter ended June 30 compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: $2.64 adjusted, vs. $1.93 expected
- Revenue: $65.3 billion vs. $64.23 billion expected
The drugstore chain reported fiscal second-quarter net income of $2.98 billion, or $2.26 per share, up from $1.94 billion, or $1.49 per share, a year earlier.
Excluding items, CVS earned $2.64 per share, higher than the $1.93 cents per share expected by analysts surveyed by Refinitiv.
Revenue rose 3% to $65.3 billion, from $63.43 billion a year prior. It also outpaced the $64.23 billion expected by analysts.
CVS raised its outlook for the year. It expects earnings of $5.59 to $5.72 per share. After adjustments, it said it expects to earn between $7.14 and $7.27 per share, up from a prior forecast of $7.04 to $7.17 per share.
At the drugstore chain, front of the store revenue and prescription volume dropped during the quarter as many customers stayed at home during shelter-in-place orders.
Front store revenues dropped 4.6% in the three month period, compared with a year prior. Prescriptions filled dropped by 1.1% on a 30-day equivalent basis for the quarter, compared with a year ago, as fewer customers went to the doctor and thus got fewer new prescriptions.
However, the company — which is also in the health benefits business — also got a boost from people’s changing medical habits. Its operating income increased by more than 40% compared with the quarter a year prior, as people deferred elective procedures and discretionary use of their health-care benefits.
On CNBC’s “Closing Bell,” Merlo said those trends started to reverse in June as the economy reopened and people used medical care in more typical ways. Stores saw more shoppers and filled more prescriptions in June and July, too, he said.
However, he said, he expects some tech-enabled habits to stick. Telemedicine use jumped by more than 700% in the second quarter. Customers used health care monitoring at home and got more comfortable with it.
“That’s something that we have invested in and you’ll see us bringing more capabilities and products to market as we move into the future,” he said.
During the pandemic, CVS has set up and operated Covid-19 testing sites. The company said it’s opened more than 1,800 test sites at drive-thru locations to date, which it runs in coordination with federal, state and local officials.
In late March, CVS announced plans to hire 50,000 additional part-time, full-time and temporary employees to keep up with demand and help with services, such as home prescription delivery. It said Wednesday that it’s hired more than 40,000 people so far.
Read the complete earnings release here.