WOONSOCKET – CVS Health Corp. reported a 16.9 percent drop in profit, but a 3 percent increase in revenue, in the first quarter.
Net income fell to $953 million, or 92 cents per diluted share, compared with net income of $1.1 billion, or $1.04 per diluted share, a year ago. The decline was driven by a 4.1 percent increase in cost of revenue and operating expenses, according to the company’s earnings release Thursday.
Net revenue climbed 3 percent on the quarter to $44.5 million, compared with revenue of $43.2 million in the year-ago quarter.
Larry J. Merlo, CVS president and CEO, said 2017 is off to a “solid start,” noting first-quarter results surpassed the company’s expectations.
“We generated $3.1 billion of free cash and continued to return value to our shareholders through high-return investments in our business as well as dividends and share repurchases. However, while we are pleased with our financial performance versus our expectations, we won’t be satisfied until the company returns to sustainable, healthy earnings growth,” Merlo said in a statement.
He said he expects 2017 to be a rebuilding year.
“We remain confident in our model as well as our position in the evolving health care landscape, and our ability to generate significant levels of cash will continue to play an important role in driving shareholder value over the longer term,” Merlo added. Cash from operations increased 44.9 percent in the quarter to $3.5 billion.
Revenue in the Pharmacy Services segment rose 8.5 percent to $31.2 billion, driven primarily by growth in pharmacy network claim volume as well as brand inflation and growth in specialty pharmacy, which was partially offset by more generic dispensing and price compression.
Pharmacy network claims rose 10.5 percent, and mail choice claims grew 4.5 percent. Pharmacy network claim volume increased due to more net new business, while growth in mail choice claims was driven by the continued adoption of the company’s Maintenance Choice offerings and rise in specialty pharmacy claims.
The Retail/LTC segment saw revenue fall 3.8 percent to $19.3 billion in the first quarter, due to a 4.7 percent decrease in same-store sales, continued reimbursement pressure and an increase in the generic dispensing rate.
In the first quarter that ended March 31, the company opened 27 new retail stores and closed 60 retail stores. Another 10 retail stores were relocated. As of the end of the first quarter, CVS operated 9,767 retail stores, including pharmacies in Target stores, in 49 states, the District of Columbia, Puerto Rico and Brazil.
CVS said it plans to shutter approximately 70 retail stores this year and expects to take a cumulative charge of approximately $220 million primarily associated with the remaining lease obligations of such stores. Sixty of these 70 retail stores closed in the first quarter and CVS took a charge of $199 million. Approximately 10 more stores are expected to close during the remainder of 2017, the company said.
Looking ahead, CVS expects earnings per share between $5.02 and $5.18 for the full year.
Lori Stabile is the PBN Web Editor.
