Pharmacy Services Segment Leads CVS Health’s Revenue Growth In Q1 2019

by Trefis Team
CVS Health
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CVS Health (NYSE:CVS) announced its Q1 2019 results recently, followed by a conference call with analysts. The company’s revenue beat consensus and was recorded at $61.6 billion, up by 34.7% y-o-y. The revenue increase was  primarily driven by the Aetna Acquisition, as well as increased volume and brand name drug price inflation in the Pharmacy Services segment. The earnings were below consensus and recorded at $1.09, up from $0.98 per share in the same period of 2018.


CVS Health reported $185.8 billion in Total Revenues in 2018. This included 3 revenue streams:

  • Prescription Drug Revenues: $47.2 billion in 2018 (25.4% of Total Revenues). This includes revenues from retail prescriptions filled by CVS in the US.
  • OTC Drugs & General Merchandise Revenue: $12.6 billion in 2018 (6.8% of Total Revenues). This includes revenues from OTC Drugs and other general merchandise sold by CVS in the US.
  • Pharmacy Services Revenue: $126.1 billion in 2018 (67.8% of Total Revenues). This includes revenues from a full range of pharmacy benefit management (“PBM”) solutions.

We have summarized our key expectations from the earnings announcement in our interactive dashboard –What Has Driven CVS Health’s Revenues & Expenses Over Recent Quarters, And What Can We Expect For Full-Year 2019?  In addition, here is more Consumer Staples data.


Key Factors Affecting Earnings:

Revenue to Grow:

  • CVS Health has seen continuous improvement in revenue over the last few quarters. The revenue has increased from $45.7 billion in Q1 2018 to $61.6 billion in Q1 2019.
  • Revenue from the Prescription Drug segment is expected to be nearly $53.6 billion in 2019. The growth is on the basis of an expected rise in the number of retail prescriptions and average revenue per prescription in the US.
  • Revenue from the OTC Drugs & General Merchandise segment is expected to continue growing and generate nearly $13.1 billion in 2019. The growth will be primarily pushed by the increasing number of CVS drugstores in the US.
  • Revenue from Pharmacy Services segment is the highest contributor to the Total Revenue of the company and is expected to continue to be so. Trefis estimates the segment to generate $132.9 billion in 2019. The growth is expected to be pushed by a higher number of mail order and pharmacy network claims.


Trend in Expenses:

  • Total Expenses have been stable for most of the quarters except Q2 and Q4 2018. These fluctuations are because of goodwill impairment expense of $3.9 billion and $2.2 billion in Q2 and Q4 2018, respectively.
  • Cost of Revenue to Total Revenue has been around 85% for 7 quarters before falling to 82.2% in Q4 2018. In Q1 2019 it remained flat at 82.2%.

Full Year Outlook:

  • For the full year, we expect gross revenue to increase by 7.4% to $199.6 billion in 2019. The increase in revenue is mostly expected from the Pharmacy Services segment due to a higher expected number of mail order and pharmacy network claims.
  • EBITDA margin is expected to increase steadily and reach around 8.4%.


Trefis has a price estimate of $62 per share for CVS Health’s stock. The value is based on the expectation that the company will continue to grow its revenue and improve EBITDA margins.



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