CVS Health on Monday reported quarterly earnings that beat analysts’ expectations on strong growth in pharmacy services but its retail drugstore business continued to lag.
For the third quarter, CVS’ net revenue increased 3.5%, or $1.6 billion, to approximately $46.2 billion while net income fell to $1.29 billion, or $1.26 per share, from $1.54 billion, or $1.43 a share, a year earlier. Excluding items, the company earned $1.50 per share.
Analysts had predicted adjusted earnings of $1.48 per share on revenue of $46.17 billion.
CVS benefited in particular from its pharmacy services segment, which generated net sales of $32.9 billion — roughly 70% of total sales and up 8.1% from the third quarter of 2016. That helped offset a 2.7% drop in retail/long-term care revenue to $19.6 billion.
Pharmacy same-store sales were down 3.4%, reflecting recent generic drug introductions, while front-store comparable sales declined 2.8% amid softer customer traffic and efforts to rationalize promotional strategies. The retail segment was also hurt by Hurricanes Harvey and Irma, which forced the closure of some 925 CVS locations at some point in the quarter.
“The solid third quarter results we posted today keep us well on track to achieve our full-year targets,” CEO Larry Merlo said in a news release. “While operating profit in the retail/LTC segment was impacted by the devastating hurricanes, operating profit in the pharmacy services segment was in line with expectations.”
CVS’ move into healthcare began with the Caremark pharmacy benefit manager platform in 2007. It has continued to focus on that business amid increasing pressure on its traditional retail sales.
Profitability in the division was hurt in the third quarter by pressure on drug prices but as CNBC reports, CVS could gain greater bargaining power with drug companies if it goes ahead with a possible acquisition of health insurer Aetna.
The company also said Monday it would begin offering next-day delivery of prescriptions and retail merchandise from its stores in 2018. According to USA Today, the service would be “a potentially preemptive strike at Amazon as the online giant weighs entry into the pharmacy business.”