CVS’ 2017 profit jumps on tax cut boon

CVS HEALTH CORP. reported a $6.6 billion profit for 2017. / BLOOMBERG FILE PHOTO.CHRISTOPHER LEE
CVS HEALTH CORP. reported a $6.6 billion profit for 2017. / BLOOMBERG FILE PHOTO.CHRISTOPHER LEE

WOONSOCKET – CVS Health Corp. on Thursday reported a $6.6 billion profit for 2017, an increase of 24.5 percent from the prior year’s $5.3 billion fueled by federal tax changes.

CVS attributed $1.6 billion in fourth-quarter cash benefits to changes enacted by the Tax Cuts and Jobs Act. The company said this was mostly due to the reduction of the corporate tax from 35 percent to 21 percent, which significantly reduced CVS’ deferred income tax liabilities.

The company reported $184.8 billion in yearly revenue for 2017, a 4 percent increase from $177.5 billion reported a year prior. Diluted earnings per share were $6.45 in 2017 compared to 2016’s $4.91.

President and CEO Larry J. Merlo stated, “In 2017, we delivered on the four-point plan we set in place to return to more robust levels of growth. Our position in the evolving health care landscape is stronger than ever before, and we remain confident in our model and in our ability to make health care more affordable, more accessible and more effective.”

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The company finished the year with a strong fourth quarter performance, recording a $3.3 billion profit, compared to $1.7 billion the year before and  $48.4 billion in revenue, compared to a $46 billion in the fourth quarter 2016. The company attributed the dramatic fourth-quarter profit increase primarily to the tax adjustment boon.

Revenue in the company’s Pharmacy Services Segment increased 9.3 percent year over year to approximately $34.2 billion in the fourth quarter – which the company attributed to growth in its pharmacy network and specialty pharmacy volume, as well as brand inflation. It noted that this increase was partially offset by continued price compression and increased generic dispensing.

Revenue for the company’s Retail/LTC Segment increased 0.3 percent year over year to approximately $20.9 billion for the fourth quarter.

It also noted that its fourth-quarter profit was impacted by $56 million in bridge-financing costs related to the proposed acquisition of Aetna Inc.

“We enter 2018 with the foundation to propel us to win across all of our businesses,” said Merlo. “I’m very pleased with the strong PBM selling season we had, with gross client wins of $6.2 billion, and our retail collaborations are expected to drive solid performance in our pharmacies.”

The company also noted that it planned to use some of the profit due to the tax change to dedicate a “portion of the benefits to additional investments in employees, data analytics, care management solutions and service offering enhancements.”

Executive Vice President and Chief Financial Officer David Denton said that the company, “will spend at least half of the benefits on debt reduction as we look to lower our leverage ratio.”

Chris Bergenheim is the PBN web editor.