CVS Health posts strong Q4

CVS Health’s fourth-quarter 2019 results brought enhanced profit and earnings per share. The Woonsocket, R.I.-based company saw fourth-quarter earnings of $66.9 billion and $1.73 in earnings per share. The full-year revenue factors year-over-year growth of 32%.

Net income raised $2.2 billion for the quarter and $7.2 billion for the year, both of which ended Dec. 31, 2019. The organization blamed the increase primarily to higher operating revenue and noted that it was partially offset by higher income tax liability associated with the increase in pre-tax income.

The development for the year was also partly offset by a higher interest rate primarily due to financing activity compared to the Aetna Acquisition and the assumption of Aetna’s debt as of the Aetna acquisition date, the company stated.

The increases in health and beauty product sales

CVS Health’s retail/long-term-care segment saw revenues increase by 2.5% in the quarter. Much of this increase was attributed to improved prescription volume — which was up 5.6% on a 30-day equivalent basis — and brand inflation, partially offset by continued compensation pressure and an enlarged generic dispensing rate.

The segment’s front-store revenues progressed 22.7% for the quarter, which CVS Health connected to increases in health and beauty product sales. The segment’s quarterly working income was $1.9 billion — a $2.1 billion increase from the prior-year Q4 loss of $270 million.

For the year, the retail/LTC segment marked revenue increase by 3.1%, with medicine volume up 5.8% on a 30-day equivalent basis. The organization attributed script growth primarily to inpatient care program adoption, PBM collaboration, and its favored status in Medicare Part D networks.

The year’s operating profit totaled $5.7 billion, marking a $5.2 billion boost over the full-year 2018. This was originally due to the absence of LTC-related impairment costs and offset by $231 million in-store rationalization charges for underperforming stores that closed, as well as $205 million in the pre-tax loss on the sale of Onofre.

Drugstore service segment development

“Client, the sufferer, and customer reception to our innovative product and assistance offerings, including our HealthHub locations, has been real,” CVS Health chairman and CEO Larry Merlo said. The company has been expanding the HealthHub format, first with an expansion in Houston, where it was conducted, supported by rollouts in Atlanta, Florida, Philadelphia, and southern New Jersey.

Revenue for the quarter from its drugstore service segment developed 6.2% from the prior-year period, totaling $37 billion, with an operating income of $1.3 billion. The organization said this growth was driven by brand extension as well as improved total drugstore claims volume. This growth was somewhat offset by continued price concentration and an expanded generic dispensing rate, CVS Health said.

For the year, revenue for the segment was $141 billion, with working income of $4.7 billion The operating profit improved in the quarter and full-year were connected to increased claims volume, the addition of Aetna’s mail-order and specialty pharmacy operations and increased purchasing business, all of which were offset by price squeezing and intangible asset amortization of Aetna’s mail-order and specialty services.

Total drugstore claims treated improved by 10.2% for the quarter, compared to the prior-year period. The group said the increase was primarily driven by net new business and the continued adoption of Maintenance Choice offerings.

Full-year claims were up 6.6%.

In the drugstore services segment, operating income and adjusted operating income increased 0.7%, for the quarter, compared to the prior-year period, principally driven by increased claims volume, the addition of Aetna’s mail order, and practice pharmacy operations, and increased purchasing economics, the company said.

CVS Health said this was partially offset by continued price compression and enhanced intangible asset amortization related to Aetna’s mail order and specialty pharmacy operations.

The company’s healthcare goods segment saw total revenue for the quarter of $17 billion, with annual revenue of $69.6 billion. Operating income for the quarter declined by $46 million to total $386 million, while the full-year operating income for the segment calculated $3.6 billion, an increase of $3.2 billion over the prior year.

“As we work to transform the way health care is delivered to millions of Americans, we are driving continued business performance and generating positive momentum across the business. Our fourth quarter and full-year financial results reflect strong financial and operational execution and a successful first year of integrating the Aetna business.

Wrapping Up

We’re using our unmatched capabilities to create a higher-quality, simpler, and more affordable health care event, which profits patients, clients, and customers and positions the company for continued progress,” said president and CEO Larry Merlo.

Merlo noted that the company had raised its outlook for 2020. CVS Health now expects adjusted EPS of between $7.04 and $7.17 for the full year. Its cash flow from operations is expected to be roughly $10.5 billion to $11 billion.