Shares of drugstore chain CVS Health Corp. (CVS, Financial) rose on Wednesday morning on the back of strong fourth-quarter and full-year 2019 earnings results that were boosted by higher sales in its pharmacy benefit management business.
The Woonsocket, Rhode Island-based company posted adjusted earnings of $1.73 per share for the quarter, topping Refinitiv’s estimates of $1.68. Revenue grew 22.9% from the prior-year quarter to $66.9 billion, beating expectations of $63.97 billion. Same-store sales increased 3.2%.
On an unadjusted basis, CVS reported quarterly net income of $1.75 billion, or $1.33 per share, which improved from a loss of $419 million, or 37 cents per share, a year ago.
For the full year, the health care-focused company recorded adjusted earnings of $7.08 per share on $256.8 billion in revenue, which was up 32% from last year.
Supported by its acquisition of Aetna in November 2018, CVS’s health care benefits segment more than doubled its revenue for the quarter, from $6.24 billion in the final quarter of 2018 to $17.15 billion for the three months ended Dec. 31, 2019.
Sales in the pharmacy unit, which provides a range of pharmacy benefit management solutions, grew 4.1% to $37.07 billion. The retail division, which includes sales of general merchandise as well as prescription refills, recorded a 2.5% increase in revenue for the quarter to $22.5 billion.
In a statement, President and CEO Larry Merlo said CVS’s results “reflect strong financial and operational execution and successful first year of integrating the Aetna business.”
“We’re using our unmatched capabilities to create a higher-quality, simpler and more affordable health care experience, which benefits patients, clients and consumers and positions the company for continued success,” he added.
Merlo also said that as a result of the “significant progress” the company made in 2019, it raised its outlook for 2020. CVS now expects adjusted operating income for the full year to range from $15.5 billion to $15.8 billion, while adjusted earnings are projected to be between $7.04 and $7.17 per share.
“As we work to transform the way health care is delivered to millions of Americans, we are driving continued business performance and generating positive momentum across the enterprise,” Merlo said.
With a $97.46 billion market cap, shares of CVS Health were trading 1.1% higher at $74.67 on Wednesday. After gaining more than 10% in 2019, the stock is down slightly year to date.
According to the GuruFocus Industry Overview page, CVS Health is the second-largest company in the health care plans sector at 14.6%. Other players in this space include UnitedHealth Group Inc. (UNH, Financial), Cigna Corp. (CI, Financial), Anthem Inc. (ANTM, Financial) and Humana Inc. (HUM, Financial).
Dodge & Cox, Barrow, Hanley, Mewhinney & Strauss, the Vanguard Health Care Fund (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Bill Nygren (Trades, Portfolio), the T Rowe Price Equity Income Fund (Trades, Portfolio), Pioneer Investments (Trades, Portfolio) and Chris Davis (Trades, Portfolio) are among the company’s largest guru shareholders.
Disclosure: No positions.
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