By Sharon Terlep and Micah Maidenberg
CVS Health Corp. posted a second straight quarter of unexpectedly strong financial results, taking another step toward selling skeptical investors on its acquisition of Aetna Inc. as the health insurer drove much of the gains.
A month after CVS laid out to investors a plan to create a health-care giant that drives down medical costs and reaps rewards of a more-efficient health-care system, the company reported higher-than-expected profit and raised its earnings outlook for the year. CVS completed its acquisition of Aetna in November.
CVS said profit in the quarter increased to $1.93 billion, or $1.49 a share, compared with a net loss of $2.56 billion, or $2.52 a share, a year earlier, when it recorded an impairment charge related to its long-term care business.
"We are successfully executing on the priorities we laid out," CVS Chief Executive Larry Merlo said on a call with investors.
The tone Wednesday was a change from early this year, when CVS gave a downbeat earnings projection for 2019 that pushed its shares down sharply and led investors to press for more detail about the company's growth plans.
CVS and rival Walgreens Boots Alliance Inc. are under pressure to find new ways to counter slowing revenue from prescription drugs, which drive the bulk of the pharmacy chain's sales. They also face government scrutiny of the traditional pharmacy-benefits business model, and particularly of rebates paid by drugmakers.
Walgreens on Tuesday disclosed a plan to close 200 of its more than 10,000 U.S. locations as part of what the company called a "transformational cost management program."
On Wednesday, CVS executives said results improved in all parts of the business. The Aetna business beat revenue expectations, largely on the growth in the increasingly central Medicare business.
Prescription sales rose 19% from a year ago, which CVS said is largely because its clinical programs are helping more people take their medication. Nonprescription drugstore sales also improved, which CVS credited to strong demand for health-related products.
CVS says the Aetna deal, melding drugstores, a pharmacy-benefit manager and an insurer, will cut health-care costs and improve care, easing the fragmented health-care experience for consumers.
Central to the concept is a plan to turn some CVS stores into health hubs offering services and products for people with chronic conditions such as high blood pressure and diabetes. Improving patients' adherence to their prescriptions would generate more drug sales for CVS while cutting down on high-cost emergency-room visits.
CVS shares rose 5% in morning trading to $56.87. The company's stock has slid about 13% so far this year following the post-earnings bump.
The company reported quarterly revenue of $63.43 billion compared with $46.92 billion a year earlier.
CVS said its pharmacy-services business, which offers pharmacy benefit services to employers, health plans and employee groups, recorded revenue of $34.84 billion for the quarter, up 4% versus a year ago.
Its retail business, filling prescription medications and selling a range of merchandise, saw revenue rise 4% to $21.45 billion. Prescription volumes grew 5.9% from a year earlier.
The company's health-care benefits business, housing Aetna, reported revenue of $17.4 billion.
CVS also said Wednesday it now expects to post an adjusted profit between $6.89 a share and $7 a share for the year, compared with an earlier forecast of $6.75 a share to $6.90 a share.
Write to Sharon Terlep at firstname.lastname@example.org and Micah Maidenberg at email@example.com