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CVS raises 2021 profit forecast after first-quarter tops Street estimates

Kitco News

(Reuters) -CVS Health Corp on Tuesday boosted its 2021 adjusted profit forecast and said it expected to see growth in its health insurance and pharmacy benefits management units this year.

Shares of the company, which also has a large chain of retail drugstores, rose 3% after it said it now expects 2021 adjusted profit of $7.56 to $7.68 per share, from its previous view of $7.39 to $7.55.

The company said it expects a return to normal demand for non-COVID-19 healthcare services and costs related to COVID-19 testing and vaccine administration to drive up its medical costs for its Aetna health insurance business marginally.

That mirrors recent comments from rival health insurer Anthem, which warned of higher medical costs in the coming quarters as more Americans get vaccinated and seek routine health care put off during the pandemic.

While the U.S. government is paying for vaccinating Americans, insurers are covering the costs of administering the shots.

CVS raised its full-year adjusted operating income target for Aetna after a near 20% jump in adjusted operating income in the first quarter.

CVS has been offering COVID-19 tests and administering vaccines at its pharmacies across the United States as part of the ongoing federal program. The company said it has so far put over 17 million vaccines into people’s arms.

Helped partly by the program, total revenue from its drug stores rose 2.3% for the quarter. The company said it expects COVID-19 vaccination and testing at its pharmacies to draw in new customers.

Vaccinated customers are more actively shopping in CVS locations, Chief Executive Officer Karen Lynch said.

Same-store sales at the company’s pharmacies, which also sell over-the-counter health products, rose 0.4% in the quarter, while front-store sales fell about 11%, partly due to a weak cough, cold and flu season.

CVS’ conservative forecast raise is prudent given the miss in the retail segment, Mizuho analyst Ann Hynes said.

Excluding items, CVS earned $2.04 per share in the first quarter, topping analysts’ estimates by 32 cents, according to Refinitiv IBES data.

Reporting by Manojna Maddipatla and Mrinalika Roy in Bengaluru; Editing by Shounak Dasgupta and Bill Berkrot

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