CVS posts profit decline, revenue jump in 1Q

CVS HEALTH Corp. President and CEO Larry J. Merlo said the company is off to a strong start in 2016, and called first-quarter earnings results "solid." / COURTESY CVS HEALTH CORP.
CVS HEALTH Corp. President and CEO Larry J. Merlo said the company is off to a strong start in 2016, and called first-quarter earnings results "solid." / COURTESY CVS HEALTH CORP.

WOONSOCKET – CVS Health Corp. posted a 6.1 percent decline in profit, but an 18.9 percent increase in revenue in the first quarter.
The company, in its earnings release on Tuesday, said profit of $1.1 billion, or $1.04 per diluted share, was recorded in the quarter ended March 31, compared with profit of $1.2 billion, or $1.07 per diluted share, in the year-ago quarter.
The profit dip was driven mostly by an increase in interest expense of $149 million and $61 million of acquisition-related integration costs, which was partially offset by an increase in operating profit – operating profit grew to $2.2 billion from $2.1 billion year over year.
CVS said the interest expense increase is primarily from the issuance of $15 billion of long-term debt in July to acquire nursing home pharmacy Omnicare Inc. and Target Corp.’s pharmacies and clinics, as well as debt assumed through the Omnicare acquisition in August.
First-quarter revenue totaled $43.2 billion compared with 2015’s first-quarter revenue of $36.3 billion. The company said revenue was boosted by retail gains as a result of the addition of long-term care operations through the acquisition of OmniCare, as well as the addition of Target’s pharmacies and clinics in December, and its own same-store sales growth.
CVS President and CEO Larry J. Merlo called the first-quarter results “solid” and said the company is off to a strong start in 2016.

“Operating profit in the retail business was in line with our expectations, while operating profit in the [personal benefit management] exceeded our expectations, driven by strong prescription volumes. We also generated $1.8 billion of free cash during the quarter and continued to return value to our shareholders through high-return investments in our business as well as dividends and share repurchases,” Merlo said in a statement.
“We continue to believe we have the right strategy for success in the evolving health care marketplace,” Merlo said.
The company revised its outlook for the year to reflect earnings per share of $5.24 to $5.39 from $5.28 to $5.43 to show the impact of acquisition-related costs and a charge related to a disputed 1999 legal settlement.

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