CVS Health (CVS) Gain Q2 2022

People walk by a CVS pharmacy store in the Manhattan neighborhood of New York City.

Shannon Stapleton | Reuters

CVS Health on Wednesday raised its earnings outlook for the year after beating Wall Street expectations for the fiscal second quarter.

The healthcare company said it now expects full-year adjusted earnings per share to be between $ 8.40 and $ 8.60, compared to its previous estimate of $ 8.20 to $ 8.40. .

Shares were up about 5% early Wednesday.

Here is what the company reported for the quarter ended June 30, compared to what analysts expected, based on a survey of Refinitiv analysts:

  • Earning per share: $ 2.40 adjusted versus $ 2.17 expected
  • Revenue: $ 80.64 billion versus $ 76.37 billion expected

On an unadjusted basis, CVS reported net income of $ 2.95 billion, or $ 2.23 per share, higher than $ 2.78 billion, or $ 2.10 per share, a year earlier. Likewise, revenues of $ 80.64 billion marked a year-over-year increase, up from 72.62 billion dollars in the same period of 2021.

The results include the different sections of CVS in the healthcare sector. It has a huge pharmacy presence, owns insurer Aetna and CVS Caremark pharmacy benefits manager, and provides patient care through MinuteClinics within its stores.

CEO Karen Lynch said the company’s strategy of adding more healthcare services is increasing sales and strengthening customer relationships.

“Our team is making significant progress on our strategy as we strive to become the leading health solutions company for nations,” he said in an earnings call. And she added that the company “will continue to build on this powerful momentum”.

Pedestrian traffic on the rise, prices on the rise

Customers made more frequent visits to CVS stores and bought more when they did, the company said. CVS experienced a single-digit average increase in travel and a single-digit average increase in average basket size during the quarter, Michelle Peluso, Chief Customer Officer, said during an earnings call.

Sales at the same store increased 8% over the same period last year as customers purchased Covid home test kits and cough, cold and flu medications. This far exceeded an expected 0.3% drop in same-store sales, according to StreetAccount consensus estimates.

In the pharmacy, sales at the same point of sale increased by 7.6%. In the front of the store, sales in the same store increased by 9.4%.

Some of these gains come from rising prices. In most cases, CVS was able to pass on the higher costs associated with inflation to buyers, Peluso said. However, he said the company “wants to make sure there is always value on the shelf for our customers.”

CVS private labels are among these affordable options. He said his store brands are on average 20% to 40% cheaper than domestic brands.

With personalized coupons and its subscription program, CarePass, customers can lower their prices even further, he said. The program, which offers discounts, free one- or two-day shipping, and other benefits, costs $ 5 per month or $ 48 on a yearly basis.

CarePass subscription has increased 26% year over year, he said.

Total pharmacy complaints processed gained 3.9% on a 30-day equivalent basis for the three months ended June 30 over the previous year. This was driven by a prolonged cough, cold and flu season compared to the same quarter of 2021.

Sales linked to the pandemic

While sales increased for the quarter, CVS said in a press release that the growth was partially offset by a drop in Covid testing and vaccinations, the introduction of new generics, and pressure on pharmacy reimbursements.

CVS administered more than 4 million Covid tests and about 6 million Covid vaccinations over the three-month period, Lynch said on the earnings call. This is down from over 6 million tests and more than 8 million injections given in the first quarter.

One aspect of Covid care, however, has increased: Lynch said demand continues to grow for antiviral drugs to treat Covid infections.

Pandemic-related services remain big business for CVS, even as test and vaccination volumes decline.

CFO Shawn Guertin said the company plans to administer nearly 20 million Covid vaccinations this year, with about 75 percent of those already given. He said he plans to supply about 19 million tests and sell more than 50 million benchtop test kits, more than double the number sold the previous year.

In total, it said these three categories will generate nearly $ 3 billion in revenue, a drop of about 33% from the previous year. He said CVS is ready to spend more in the second half of the year as it prepares for a potential spike in Covid cases.

Additionally, he said, pandemic-related articles are driving foot traffic and sales to 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.

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