CVS Q1 Earnings Review : Revenues, EPS Increase

May 4th, 2016 by Trefis Team
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CVS (NYSE:CVS) announced its Q1 earnings on Tuesday, May 3rd. The company’s revenue grew by 18.9% year-on-year (y-o-y) to $43.2 billion for the quarter. The rise in revenue was primarily driven by the strong performance of the PBM business and Retail/LTC business. The company’s operating profits increased by 2% y-o-y to $2.2 billion. The figures were dented by the inclusion of the acquisition costs of Omnicare and Target Pharmacy. Excluding these costs, operating profit increased 5% y-o-y. The company’s adjusted earnings increased 4% over the prior year quarter to $1.18 per share, which were marginally better than market estimates of $1.16. The company also opened 24 new stores during the quarter, which took its store count to 9,674 at the end of Q1 2016. Buoyed by the increase in earnings, CVS  increased its EPS guidance for full year 2016 from $5.73 to $5.88.

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Revenue Growth

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The increase in revenue was largely driven by better figures in the PBM and Retail/LTC businesses. The PBM business grew by 20.5% y-o-y to $28.8 billion. In the PBM business, Specialty Pharma was the main growth driver, with revenue growth of 23% y-o-y. The increase in revenue was primarily  attributed to increases in renewals and scripts. The integration of Omnicare also aided the growth.

The Retail business also grew by almost 19% y-o-y to $20.1 billion. Same store sales increased by 4.2% y-o-y, while pharmacy store sales increased 5.5% over the prior year. The addition of Target Pharmacy also aided the increase in revenues for the division.

Free Cash Flow

The company’s free cash flow for the quarter increased by almost 14% y-o-y to $1.8 billion. The company’s full year free cash flow guidance is for $5.3 to $5.6 billion.

 

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our detailed analysis for CVS Health

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