CVS Health raises 2020 earnings guidance as plan to offer wide range of medical services pays off

CVS Health reported a better-than-expected 3.5% jump in third-quarter revenue and raised its 2020 earnings guidance on Friday as its plan to remake the drugstore chain into a health service company paid off.

Offering everything from insurance to Covid-19 testing, the health-care company also named a new CEO. Karen Lynch will become the company’s CEO on Feb. 1. She is currently executive vice president of CVS Health and president of Aetna, the health insurer that CVS acquired in 2018.

CVS CEO Larry Merlo will step down from the role, but serve on the company’s board of directors.

Shares were up nearly 3% pre-market trading.

Here’s how the company reported for the quarter ended Sept. 30, compared with what analysts were expecting, based on a survey of analysts by Refinitiv:

• Adjusted earnings per share: $1.66 adjusted vs. $1.33 expected
• Revenue: $67.06 billion, vs. $66.66 billion expected

On an unadjusted basis, the health-care company and drugstore chain reported fiscal third-quarter net income of $1.22 billion, or 93 cents per share, down from $1.53 billion, or $1.17 per share, a year earlier.

Revenue rose 3.5% to $67.06 billion, from $64.81 billion a year prior. It also outpaced the $66.66 billion expected by analysts.

At the company’s drugstores, sales rose in both the pharmacy and the front of the store as customers filled more prescriptions, got Covid-19 tests and filled up bigger baskets of items of over-the-counter items.

Prescriptions filled increased 4.6% on a 30-day equivalent basis in the quarter compared with the prior year. Front store revenues increase 2.7% in the quarter compared with the prior year.

The company raised its full-year guidance for earnings per share to between $5.60 to $5.70 from $5.16 to $5.29 and its full-year 2020 adjusted earnings per share guidance range to $7.35 to $7.45 from $7.14 to $7.27.

It said its cash flow for the full year would range from $12.75 billion to $13.25 billion, higher than its previous outlook of between $11 billion to $11.5 billion.

The company cautioned that there was still some uncertainty because of the Covid-19 pandemic.

CVS has expanded Covid-19 testing, administered flu shots and prepared for the rollout of the coronavirus vaccine during the pandemic. It has more than 4,000 drive-thru test sites at its pharmacies and has administered more than 6 million tests. The company said it plans to have nearly 1,000 sites for rapid testing by the end of the year.

In mid-October, CVS and its rival Walgreens announced a deal with the government to administer coronavirus vaccines to the elderly and staff in long-term care facilities when they become available.

Since March, CVS has hired about 76,000 full-time, part-time and temporary employees. It has about 300,000 employees.

Last month, it said it planned to add even more workers. It said it would immediately hire 15,000 people — the majority made up of pharmacy technicians — to prepare for an expected increase in Covid-19 and flu cases this fall and winter.