CVS Health Corp. cut its earnings forecast for the year as it looks to pay for two major acquisitions that are central to its strategy of broadening its health-care services.
(Bloomberg) — CVS Health Corp. cut its earnings forecast for the year as it looks to pay for two major acquisitions that are central to its strategy of broadening its health-care services.Â
Adjusted profit for 2023 will be $8.50 to $8.70 a share, Woonsocket, Rhode Island-based CVS said Wednesday in a statement, a decrease of 20 cents across the range from its earlier view. The company cited costs for acquiring technology provider Signify Health, along with another deal for Oak Street Health that closed Tuesday. CVS now faces challenges of integrating Oak Street and Signify and determining how they want their care delivery business to operate. Â
As traditional retail pharmacy has become more competitive, giant drug-store and retail chains have looked to other dimensions of health care for alternative revenue streams. Rival Walgreens Boots Alliance Inc. has been adding primary care centers to US locations, and earlier this year, Amazon.com Inc. closed a $3.49 billion deal with virtual primary-care clinic company One Medical.
The shares fell 1.8% before markets opened in New York. They lost 22% of their value this year through Tuesday’s close.
CVS’s adjusted earnings for the quarter were $2.20 a share, beating the $2.09 average estimate of analysts surveyed by Bloomberg. Revenue rose 11% from a year ago to $85.3 billion, beating estimates of $80.9 billion.Â
The chain also realigned how it reports earnings with the creation of two new segments that will replace the retail/long-term care and pharmacy services units. The first, health services, will include health-care delivery operations such as Oak Street and Signify. The other segment, pharmacy and consumer wellness, includes current businesses such as traditional retail pharmacy, specialty pharmacy, mail-order pharmacy and nonpharmacy offerings. The health-care benefits segment that contains the Aetna insurance business will remain the same.
Rising Sales
With fewer customers coming into stores for Covid tests and vaccines, the pharmacy and consumer wellness segment saw growth thanks to increased prescription and nonpharmacy sales, brand inflation and other factors. Sales totaled $27.9 billion in the first quarter, easily beating estimates of $26.4 billion.
Revenue in the health-services segment, the company’s largest, rose 12.6% to $44.6 billion from a year ago, helped by more pharmacy claims, demand for specialty pharmacy and higher prices.
The health-insurance unit beat estimates with quarterly sales of $25.8 billion, a 12.1% increase from the year earlier, which CVS said was due to growth across all product lines. The unit’s medical benefit ratio rose to 84.6%, signaling that the company spent more of its premium dollars on patient care.
(Updates with segment details in final section)
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