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Pharmacy services segment fuels CVS Health Q4 sales


CVS Health on Thursday reported record fiscal fourth-quarter and full-year 2016 results

Net revenues for the three months ended Dec. 31 increased 11.7% to $46 billion, up from $41.1 billion in the year ago period.

Net income also enjoyed a healthy increase, with GAAP diluted earnings per share rising to $1.71 billion, or $1.59 per share in the most recent quarter, compared to $1.5 billion, or $1.34 per share in the year-ago period. Adjusted earnings per share were $1.71, an increase of 11.7% year over year.

Perhaps the greatest source of strength can be attributed to revenues in CVS’ Pharmacy Services Segment, which rose 17.9% to $31.3 billion in the three months ended Dec. 31. This increase was primarily driven by growth in pharmacy network and specialty pharmacy claims.

Revenues in the Retail/LTC Segment increased 4.7% to $20.8 billion in the three months ended Dec. 31. The increase was largely driven by the addition of the pharmacies of Target, which were acquired in December 2015.

Pharmacy same-store prescription volumes rose 2% on a 30-day equivalent basis. Same-store sales decreased 0.7% versus the prior year, with pharmacy same store sales up 0.2% and front store same store sales down 2.9%.

Front-store same-store sales were negatively impacted by softer customer traffic and efforts to rationalize promotional strategies, partially offset by an increase in basket size. Pharmacy same-store sales were negatively impacted for the quarter by approximately 380 basis points due to recent generic introductions.

“In 2016, we delivered strong results across the enterprise, with revenues up nearly 16% and Adjusted EPS up more than 13%,” said Larry Merlo, president and CEO of CVS. “Adjusted EPS in the fourth quarter came in just above the high end of our guidance, as the Retail/LTC segment delivered results in line with our expectations while the PBM exceeded expectations. We also generated more than $8 billion in free cash for the full year, exceeding our expectation, and we returned more than $6 billion to shareholders through dividends and share repurchases. Our substantial cash generation capabilities provide opportunities to bolster our growth, and we will continue to be thoughtful and disciplined with respect to using our free cash to return value to shareholders.”

For the full year, ended Dec. 31, net revenues increased 15.8% to $177.5 billion, compared to $153.3 billion last year. Net income for the year ended Dec. 31 was $5.3 billion, an increase of $80 million or 1.5%.

For its 2017 fiscal year, CVS expects to deliver GAAP diluted earnings per share of $5.02 to $5.18 and Adjusted earnings per share of $5.77 to $5.93 for the full year 2017. CVS expects to deliver GAAP diluted EPS of $0.82 to $0.88 and Adjusted EPS of $1.07 to $1.13 in first quarter 2017.

CVS opened 40 new retail stores and closed 25 retail stores in its fiscal fourth quarter. In addition, it relocated 16 retail stores. As of Dec. 31, the CVS operated 9,709 retail stores, including pharmacies in Target stores, in 49 states, the District of Columbia, Puerto Rico and Brazil.

As CVS previously discussed, it intends to close approximately 70 retail stores during 2017 and expects to take a charge of approximately $225 million associated with the remaining lease obligations of such stores. The vast majority of the store closures are expected to occur by the end of this quarter.
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