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MarketScreener Homepage  >  Equities  >  Nyse  >  CVS Health Corporation    CVS


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CVS Health : , Under Pressure After Aetna Deal, Sets Long-Term Profit Goals

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06/04/2019 | 08:04am EST

By Sharon Terlep

CVS Health Corp., under pressure to reassure skeptical investors, provided longer-term financial forecasts for the first time since acquiring insurer Aetna Inc.

CVS reaffirmed its 2019 financial targets, but its projections beyond this year came in slightly below Wall Street expectations. The company said Tuesday it expects adjusted earnings per share above $7 in 2020, growing by a mid-single digit percentage in 2021 and smaller increases the years following.

Wall Street analysts had predicted adjusted earnings per share of $7.22 for next year and growth of 8% to $7.80 for 2021, according to a poll by Refinitiv. The adjusted earnings exclude factors unrelated to CVS operations, including costs and income related to asset sales and acquisitions.

CEO Larry Merlo and his executive team will host a meeting with investors and financial analysts Tuesday morning to review their forecasts and strategy. Also Tuesday, the company's lawyers will be in a federal court in an unusual proceeding to defend their $70 billion merger, which closed in November.

CVS is under pressure to find new ways to counter slowing revenue from prescription drugs, which drive the bulk of the pharmacy chain's sales. The company and its rivals also face government scrutiny of the traditional pharmacy-benefits business model, particularly rebates paid by drugmakers. Health insurers' shares have also been dragged down by some Democrats' support for universal government health coverage.

In February, CVS gave a downbeat earnings projection for 2019, pushing its shares down sharply and leading investors to press for more detail about the company's growth plans. The shares have stagnated despite stronger-than-expected first-quarter results, and CVS has promised a fuller picture of its future in the Tuesday session.

On Tuesday, CVS said by the end of 2021 it plans to have 1,500 new health-hub stores designed to offer a broader range of services, many aimed at those with chronic illnesses. The company, with about 9,800 stores, previously said it aimed to convert roughly 1,000 locations into hubs and hadn't given a timeline.

A trio of heath hubs in Houston has proved successful, Kevin Hourican, president of CVS Pharmacy, said in an interview. He declined to say whether the new model improved store profitability but said the stores posted increased traffic and higher demand for prescriptions and medical services, and on average sold higher-margin items.

Rival Walgreens Boots Alliance Inc. is also adding similar services to hundreds of U.S. drugstores. Ultimately CVS hopes its health-hub model will lower costs for chronic-disease sufferers, which will save the company money through Aetna while creating a service other insurers will pay for.

CVS plans to fund the health-hub expansion by cutting back on traditional store refurbishments, Mr. Hourican said. It plans this year to open additional hubs in Houston, the Philadelphia area, Atlanta and Tampa, Fla.

The company said it still expects the merger with Aetna to create about $300 million to $350 million of cost savings and other benefits in 2019 and about $800 million of so-called synergies in 2020.

For 2019, the company kept the targets it set in February, when it predicted adjusted earnings of $6.75 to $6.90 per share and consolidated revenue of $251.2 billion to $254.4 billion.

CVS shares, which have tumbled this year, were little changed before U.S. markets officially opened Tuesday. The shares rose 36 cents to $53.75 in premarket action.

--Anna Wilde Mathews contributed to this article.

Write to Sharon Terlep at sharon.terlep@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
CVS HEALTH CORPORATION 1.18% 75.36 Delayed Quote.13.68%
WALGREENS BOOTS ALLIANCE -0.80% 58.63 Delayed Quote.-13.51%
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Financials (USD)
Sales 2019 254 B
EBIT 2019 15 044 M
Net income 2019 6 575 M
Debt 2019 62 782 M
Yield 2019 2,65%
P/E ratio 2019 15,0x
P/E ratio 2020 13,5x
EV / Sales2019 0,63x
EV / Sales2020 0,60x
Capitalization 98 041 M
Duration : Period :
CVS Health Corporation Technical Analysis Chart | MarketScreener
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Technical analysis trends CVS HEALTH CORPORATION
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 28
Average target price 80,81  $
Last Close Price 75,36  $
Spread / Highest target 22,1%
Spread / Average Target 7,23%
Spread / Lowest Target -19,1%
EPS Revisions
Larry J. Merlo President, CEO & Non-Independent Director
David Wyatt Dorman Chairman
Jonathan C. Roberts Chief Operating Officer & Executive Vice President
Eva C. Boratto Chief Financial Officer & Executive Vice President
Troyen A. Brennan Chief Medical Officer & Executive Vice President