What To Expect From CVS Q1 2018 Earnings

by Trefis Team
CVS Health
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CVS Health (NYSE:CVS) is scheduled to release its first quarter results on May 2. The company posted healthy growth in its fourth quarter and full year results.  The company posted a 5.3% increase in sales to $48.4 billion in Q4 while full year 2017 sales rose by 4.1% to $184.8 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 Q1 2018 earnings, the company management has forecast mid-teens growth rate in sales and consolidated operating profit growth of 0.5% to 4.5%.

Please refer to our dashboard analysis on CVS

The factors below will likely play a key role in CVS’s Q1 results.

Retail/LTC segment –

In its Retail/LTC segment, the company had moderate revenue growth of 0.9% y-o-y in the previous quarter.  In the upcoming Q1 growth for this segment will follow an upward trend 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 grew 9.3% y-o-y in the previous quarter. Certain factors that have aided growth in this segment and are likely to favor include network claims, brand inflation, and growth in specialty pharmacy. This segment includes the pharmacy benefits manager business and specialty pharmacy services.

CVS’ Business Will Likely Receive A Major Boost From the Acquisition of Aetna –

Announced in December 2017, the acquisition of Aetna by CVS will likely provide a major boost to CVS’s business in 2018 and beyond. The combination is expected to provide consumers with a more integrated experience, reduced costs, and improved access to health care experts in homes. This will combine CVS’s dense local presence through pharmacies and clinics with Aetna’s health care benefits and services.

CVS’s PBM business will get a shot in the arm due to greater negotiating power with the drug companies. The company will also be able to tap into Aetna’s 45 million user base and provide them with its offerings which include pharmacy benefit management – the negotiation of  drug prices on the behalf of insurance companies – MinuteClinics, home infusion services, and long-term care pharmacies.

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


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