CVS tops quarterly estimates on Aetna strength; raises profit forecast

[November 06, 2019]   (Reuters) - CVS Health Corp <CVS.N> posted better-than-expected quarterly profit and revenue on Wednesday, boosted by its Aetna health insurance and pharmacy benefits management units, prompting it to raise its 2019 earnings forecast.

People walk by a CVS Pharmacy store in the Manhattan borough of New York City, New York, U.S., November 30, 2017. REUTERS/Shannon Stapleton

Shares of the company, which also runs drugstores, rose 2.4% in early trading.

CVS is moving deeper into healthcare and completed its Aetna purchase last year, combining one of the largest pharmacy benefit managers with one of the nation's oldest health insurers.

The pharmacy benefits management (PBM) business, which negotiates discounts with drugmakers for its clients that include insurers, gained in the third quarter from increased pharmacy claims and a rise in prices of branded drugs.

Sales in the unit rose 6.4% to $36.02 billion.

The healthcare benefits business, which houses Aetna, reported sales of $17.18 billion, helped by lower-than-expected medical costs.

The unit reported a medical benefit ratio of 83.3%, compared with estimates of 84.3%, according to four analysts polled by Refinitiv.

The ratio is a key metric that compares the amount CVS spent on medical claims with income from premiums.

Even as the two businesses showed strength, CVS' retail unit came under some pressure from lower reimbursement rates for filing prescriptions, which has plagued the industry since the past few quarters.

CVS's rival drugstore chain Walgreen Boots Alliance Inc <WBA.O> has been exploring whether to go private following private equity interest in the company, Reuters reported on Tuesday, citing sources.

CVS said on Wednesday it plans to close 22 underperforming retail pharmacy stores in the first quarter of 2020.

Sales in CVS's retail unit rose 2.9% to 21.47 billion, the slowest growth rate across its businesses in the quarter.

The company now expects its 2019 adjusted profit to range between $6.97 and $7.05 per share, compared with its previous forecast of $6.89 to $7.00.

CVS's net profit rose 10.1% to $1.53 billion, or $1.17 per share, in the quarter ended Sept. 30.

Excluding items, the company earned $1.84 per share, above analysts' estimates of $1.77.

Revenue jumped 36.5% to $64.81 billion, beating the average analyst estimate of $62.99 billion.

(Reporting by Manas Mishra and Trisha Roy in Bengaluru; Editing by Maju Samuel)

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