CVS Turns Quarterly Profit, Posts Higher Revenue

By Dave Sebastian 

CVS Health Corp. turned a profit and recorded higher revenue for the fourth quarter as it capped its first year of integrating Aetna Inc.'s operations.

The pharmacy operator on Wednesday reported net income of $1.75 billion, or $1.33 a share, compared with a loss of $419 million, or 37 cents a share, in the comparable quarter a year before. Adjusted earnings were $1.73 a share.

Analysts polled by FactSet were looking for earnings of $1.22 a share, or $1.68 a share on an adjusted basis.

CVS said its revenue rose 22.9% to $66.89 billion from the same period the year before as revenue from premiums shot up. Analysts were targeting $63.93 billion.

The company's health-care-benefits business, which includes Aetna, posted revenue of $17.15 billion, up nearly threefold from the prior year. The segment's medical-loss ratio, which represents the share of premiums paid out in claims, was 85.7% for the quarter.

Its business that offers pharmacy-benefit services to employers, health plans and employee groups had $37.07 billion in revenue for the quarter, up from $34.9 billion in the prior year.

Revenue in its retail segment, which fulfills prescription medications and sells a range of merchandise, was $22.58 billion, up from $22.03 billion in the year-ago period. Like competitor Walgreens Boots Alliance Inc., CVS faces pressure on margins in its retail-pharmacy business.

For 2020, CVS expects per-share earnings from continuing operations of $5.47 to $5.60, or $7.04 to $7.17 on an adjusted basis. It sees operating income of $12.8 billion to $13 billion, or $15.5 billion to $15.8 billion on an adjusted basis.

Former Aetna Chief Executive Mark Bertolini last week resigned from the CVS board after CVS said he wouldn't stand for re-election later this year, in a show of tension underlying one of the biggest U.S. health-care mergers. Mr. Bertolini, who joined the board after CVS paid nearly $70 billion to buy the health insurer in 2018, told The Wall Street Journal he was being pushed out, with the integration of the two companies still not complete.

The CVS-Aetna deal was always seen as a huge operational challenge, as the companies would have to pull together vastly different businesses, ranging from corner drugstores to Aetna's Medicare and Medicaid coverage.

Investors have also pushed down shares of insurers over political concerns, as Democratic presidential candidates push for a revamp of the U.S. health-care system.

CVS shares rose 1.6% in premarket trading.

--Anna Wilde Matthews contributed to this article.

(END) Dow Jones Newswires

February 12, 2020 07:33 ET (12:33 GMT)

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