CVS completes two big deals; posts strong Q1, realigns segments
CVS Health Corp. reported better-than-expected first-quarter sales and earnings but lowered its profit outlook due to costs associated with two recently completed acquisitions.
On May 2, the retail pharmacy and insurance giant completed its acquisition of primary care provide Oak Street Health for approximately $10.6 billion. Earlier, on March 23, it completed the acquisition of healthcare company Signify Health for approximately $7.8 billion.
During the quarter, CVS realigned its segments to correspond with changes made to its operating model. The realignment included the formation of a new health services segment — comprised of pharmacy benefit management operations, health care services and provider enablement solutions — and a new pharmacy and consumer wellness segment, made up of enterprise pharmacy fulfillment and retail front store operations.
CVS reported profit of $2.14 billion, or $1.65 a share, for the quarter ended March 31, compared with $2.35 billion, or $1.77 a share, in the year-ago period. Excluding one-time items, the company reported earnings of $2.20 per share for the quarter, topping analysts’ estimates of $2.09 per share.
Total revenues rose 11% to $85.28 billion, easily topping estimates of $80.81 billion, driven by growth across all segments.
Revenues in the pharmacy & consumer wellness segment (formerly Retail/LTC), which includes CVS brick-and-mortar sales, increased 7.8% to $27.92 billion, primarily driven by increased prescription and front store volume, pharmacy drug mix and brand inflation.
Prescriptions-filled increased 2.5% on a 30-day equivalent basis compared to the year-ago quarter. Excluding the impact of COVID-19 vaccinations, prescriptions-filled increased 4.5%.
CVS’ health insurance segment posted revenue of $25.88 billion, up 12% from the year earlier period.
Revenue at CVS’ health services segment rose 12.6% $44.59 billion. The segments are pharmacy benefit management company CVS Caremark and healthcare services delivered at home and in medical clinics.
“We delivered another strong quarter while executing on the strategy we outlined in December 2021, leading to the close of the Signify Health acquisition followed quickly by Oak Street Health,” said Karen S. Lynch, president and CEO, CVS Health. “These additions are core to our strategy and will help unlock future growth as we push further into value-based care, which prioritizes keeping people healthy.”
CVS lowered its 2023 adjusted earnings guidance to $8.50 to $8.70 per share, which is $0.20 lower than its previous projection of $8.70 to $8.90 per share.