What to Expect From CVS Q4 2017 Earnings

by Trefis Team
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CVS Health (NYSE:CVS) is scheduled to release its fourth quarter results on February 8. The company posted a better than expected performance in the last quarter where its revenues increased by 3.5% to reach $46.2 billion. In the upcoming earnings announcement, we anticipate the company to continue to post healthy growth. Several factors will contribute to CVS’s growth including its pharmacy benefit management (PBM) business and strategic acquisitions aimed at expanding its presence into the healthcare business, which began with the 2007 acquisition of Caremark pharmacy benefit manager (PBM) platform.

For the Q4 earnings, the company management has forecast mid-teens growth rate in sales. For full year 2018, the company anticipates to grow its net revenue in the range of 0.75-2.5% and its profit by 1-4%. In all, growth in scripts and claims, and improvement in purchasing efficiencies from the company’s Red Oak venture are expected to positively contribute to the company’s growth.

Please refer to our dashboard analysis on CVS

The factors below will likely play a key role in CVS’s Q4 results.

Retail/LTC segment –

In its Retail/LTC segment, the company has guided revenue growth of 2.5-4%. This healthy growth will be primarily driven by solid same store script growth as a result of partnerships established with PBMs and health plans. Increased participation as a pharmacy in Medicare Part D networks will also boost results.

Pharmacy Services segment –

In its Pharmacy Services segment, CVS has guided for more modest growth of about 1.5-3.5% driven by claims growth of about 8%. Certain factors that have impacted growth in this segment include rebates for Aetna’s Medicare Part D business under CVS’s PBM contract and anticipation of generic specialty introduction. Pricing pressure due to intense competition including from Walgreens will likely also weigh on growth from this segment.

Partnerships will benefit results –

CVS’s is focusing on partnering with all players to boost volumes and capture market share. For example, in 2017 June, it announced a partnership with Cigna Health Works., later in July, it launched a partnership with Optum to provide 90-day retail solutions to the latter’s ASO clients. It has also partnered with Express Scripts’ Diabetes Care Value program to be their retail network option. The company is in talks with many such PBM health plans to expand the reach of its network. These partnerships will drive growth in Q4 results.

All in all, we expect CVS to post healthy growth in the coming earnings.

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