CVS Fourth-Quarter Earnings Top Expectations as Covid Vaccines Lift Overall Store Sales

Suzanne Kreiter | Boston Globe | Getty Images
  • Demand for at-home Covid tests and vaccines lifted overall store sales, helping CVS Health top expectations for fourth-quarter earnings.
  • The drugstore chain administered more than 20 million Covid vaccines in the three-month period, a significant jump from the number it gave in each of the prior two quarters.
  • The company said it also benefited from the growth of specialty pharmacy.

CVS Health said Wednesday that demand for Covid vaccines and at-home tests lifted overall store sales, helping the company top expectations for fourth-quarter earnings.

Shares fell 5.45% to close Wednesday at $104.79, after the company reiterated rather than raised its fiscal 2022 forecast earlier in the day.

The pharmacy chain and health-care company administered more than 8 million Covid tests and more than 20 million Covid vaccines in the fourth quarter, a significant jump from the nearly 17 million shots administered in the second quarter, and the 11.6 million that it gave in the third.

CVS has played a key role in the country's response to the coronavirus pandemic, along with competitor Walgreens Boots Alliance. Covid-related services have led to a boost in its retail and pharmacy business over the past year, particularly during the holiday quarter when consumers sought out booster shots and at-home tests ahead of gatherings.

Here's what the company reported for the three-month period ended Dec. 31, compared with what analysts were expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: $1.98 adjusted vs. $1.93 expected
  • Revenue: $76.60 billion vs. $75.67 billion expected

Led by its new CEO, Karen Lynch, CVS is expanding into more health-care services and pledging to use its scale to reduce costs and improve outcomes. The company is combining the different parts of its business: A huge national footprint of drugstores; its insurance business, Aetna; and pharmacy benefits manager, Caremark.

On an earnings call, she called the company's administration of millions of Covid tests and vaccines "a powerful example of the relationship we're building with consumers, which leads to new customers seeking a range of other health services at CVS Health."

CVS reported fiscal fourth-quarter net income of $1.31 billion, or 99 cents per share, up from $973 million, or 74 cents per share, a year earlier.

The company said its net income from continuing operations was 98 cents. But it earned $1.98 per share, after adjustments, which was more than the $1.93 per share expected by analysts surveyed by Refinitiv.

CVS is overhauling its stores to match that health-care focus. Starting this spring, it plans to shutter about 900 locations – or 9% of the company's roughly 10,000 U.S. stores – over the next three years.

The company's operating income in the quarter dropped by nearly 12%, with much of that coming from a store impairment charge of about $1.4 billion as it wrote down leases for property and equipment to plan for those closures.

Total revenue for the period rose to $76.60 billion from $69.55 billion a year earlier, exceeding expectations of $75.67 billion.

Same-store sales at CVS rose by 13.4% in the fourth quarter. CVS said it saw higher prescription volumes, front-of-store sales and vaccinations during the latest period. It said it also benefited from the growth of specialty pharmacy.

Across CVS' business segments, retail/long-term care revenue grew 12.7% to $27.11 billion, health-care benefits revenue increased 8.4% to $20.7 billion and pharmacy services revenue rose 8.2% to $39.34 billion.

Covid vaccinations, diagnostic tests and sales of over-the-counter test kits accounted for about 40% of the increase in the retail segment's revenue.

In the coming fiscal year, CVS said it expects earnings from continuing operations to range between $7.04 and $7.24 per share and adjusted earnings to range between $8.10 and $8.30 per share.

Chief Financial Officer Shawn Guertin said CVS is maintaining rather than raising its forecast after seeing some of its business pulled forward. He said demand for booster shots jumped earlier than expected — in the fourth quarter, rather than the first quarter of 2022.

In 2022, Guertin said the company anticipates the number of vaccines administered will drop approximately 70% to 80%, and the amount of in-store diagnostic testing will decline 40% to 50% compared with 2021. He said CVS expects "modest full-year volume growth" for at-home Covid tests.

Shares of CVS are up 43% over the past 12 months, as of Wednesday's close. The company's market value is $138.33 billion.

Read the company's press release here.

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