CVS reports increases in profit, revenue, in 2016, 4Q

LARRY J. MERLO, CVS president and CEO, said the company “delivered strong results across the enterprise” in 2016. / COURTESY CVS HEALTH
LARRY J. MERLO, CVS president and CEO, said the company “delivered strong results across the enterprise” in 2016. / COURTESY CVS HEALTH

WOONSOCKET – CVS Health Corp. reported a 1.9 percent increase in profit in 2016, and a nearly 16 percent increase in revenue, boosted by its Pharmacy Services Segment.

The company, in its earnings report Thursday, reported profit of $5.3 billion in 2016, or $4.91 per diluted share, compared with profit of $5.2 billion, or $4.62 per diluted share.
Revenue grew to $177.5 billion in 2016, from $153.5 billion in 2015.

In the fourth quarter, profit grew to $1.7 billion, or $1.59 per diluted share, a 13.3 percent increase compared with fourth quarter 2015 profit of $1.5 billion, or $1.34 per diluted share.

Analysts had predicted fourth-quarter earnings per share of $1.67. CVS stock was trading at $76.17 as of 11:08 a.m., which is below its Wednesday close of $77.03.

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Fourth-quarter revenue was $46 billion, a nearly 12 percent increase from 2015 fourth-quarter revenue of $41.1 billion.

President and CEO Larry J. Merlo said the company “delivered strong results across the enterprise” in 2016.

“We also generated more than $8 billion in free cash for the full year, exceeding our expectation, and we returned more than $6 billion to shareholders through dividends and share repurchases. Our substantial cash generation capabilities provide opportunities to bolster our growth, and we will continue to be thoughtful and disciplined with respect to using our free cash to return value to shareholders,” Merlo said in a statement.

The company said Pharmacy Services Segment revenue climbed 19.5 percent to $120 billion, compared with $100.4 billion the previous year, thanks to growth in pharmacy network and specialty pharmacy claims. Pharmacy Services Segment fourth-quarter operating profit also included the favorable impact of a reversal of an accrual of $88 million in connection with a legal settlement.

It also said net revenue in the Retail/LTC Segment increased 12.6 percent to $81.1 billion in 2016, compared with $72 billion in 2015.

(The company removes transactions that are counted in both retail and pharmacy operations when calculating the final net revenue figure; thus while adding the nominal total for both segments yields a revenue figure of more than $200 billion, the $177.5 billion reflects the elimination of those duplicative transactions.)

It said Corporate Segment operating expenses fell $143 million during the year, primarily due to a decrease in acquisition-related transaction and integration costs of $146 million, an $87 million decrease in legal charges associated with a disputed 1999 legal settlement, which was partially offset by operating expense increases associated with the 2015 acquisitions of Omnicare and the pharmacies and clinics of Target, as well as increases in legal and strategic initiative costs.

The company also confirmed its previous earnings per share guidance of between $5.02 and $5.82 for 2017, and cash flow from operations of $7.7 to $8.6 billion.

“As we outlined late last year, we have a four-point plan in place to return to more robust levels of growth in the years ahead. We remain confident in our model and our position in the evolving health care landscape. We can bring value to all health care stakeholders, helping them achieve their goals of making care more affordable, accessible, and effective,” Merlo said.

In the fourth quarter, the company opened 40 new retail stores and closed 25 retail stores.

It also relocated 16 retail stores. As of Dec. 31, CVS operated 9,709 retail stores, including pharmacies in Target stores, in 49 states, the District of Columbia, Puerto Rico and Brazil.
The company has previously said it will close approximately 70 more retail stores this year and expects to take a charge of approximately $225 million associated with the remaining lease obligations of such stores. Most of the closings are expected to take place in the first quarter.

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