CVS raises 2021 forecast, says insurance coverage of at-home Covid tests may lift drugstore sales further

CVS Health on Tuesday raised its full-year earnings outlook and reiterated prior guidance for 2022, as the company draws customers to stores with Covid tests and vaccines and chases opportunities to offer them other kinds of health-care services.

The company said it expects full year 2021 earnings to be in a range of $5.87 to $5.92 per share, up from previous expectations of $5.50 to $5.61 per share.

After adjustments, it expects to earn $8.33 to $8.38 per share, up from a prior forecast of at least $8 per share. The new range is above the $8.03 per share that analysts surveyed by Refinitiv are projecting.

At the virtual J.P. Morgan Healthcare Conference on Tuesday morning, Chief Financial Officer Shawn Guertin said retail sales have been especially strong in the fourth quarter. He said vaccination rates were much higher than the company expected in November and December. Sales of over-the-counter Covid test kits also took off in December, he said.

He said about 80% of the company’s outperformance is coming from the retail side — with more than half of that coming from Covid vaccines.

Plus, he said, the omicron-fueled surge of Covid cases so far appears to be leading to less medical care and fewer hospitalizations. That means it is driving lower costs for CVS’ health insurance business, Aetna, compared with the delta variant.

He said CVS is trying to figure out how the pandemic may play out in the coming months and what that means for its business. Starting later this week, private insurance companies, including Aetna, will be required to cover the cost of at-home Covid tests for people on its plans. He said that could lead to a variety of outcomes, such as higher sales of drugstore items as people browse aisles for the test kits, elevated costs as insurance members submit for test reimbursements or a decline in Covid tests billed to insurance by medical professionals as more people do tests on their own.

He said the company will provide more guidance during its fourth-quarter earnings call in early February.

In the coming year, CVS wants to turn itself into more of a health-care destination by adding more medical professionals, diagnostic tests and primary care to its stores. It is rolling out a new store format, called a HealthHub. It is weaving together different pieces of its business. For example, it encourages people with Aetna health insurance plans to visit Minute Clinics, urgent care clinics inside of its drugstores.

CVS reaffirmed its 2022 forecast, which calls for earnings per share to be between $7.04 and $7.24, and between $8.10 and $8.30 per share, after adjustments.

Analysts have been looking for CVS to earn $8.27 per share, after adjustments, in 2022.

Shares were up about 1% early Tuesday. They touched a 52-week high of $107.26.