CVS Stock Surges On Q3 Earnings Beat, Profit Outlook Boost, $5 Billion Opioid Settlement

Healthcare benefits sales continued to power both the top and bottom line for CVS, which boosted its full-year profit forecast for the third consecutive quarter.

CVS Health Corp.  (CVS) – Get CVS Health Corporation Report posted better-than-expected third quarter earnings Wednesday, and lifted its full-year profit forecast, offsetting the impact of a $5 billion agreement to settle lawsuits linked to the U.S. opioid crisis.  

CVS said adjusted earnings for the three months ending in September were pegged at $2.09 per share, up 6.1% from the same period last year and 10 cents ahead of the Street consensus forecast. Group revenues, CVS said, rose 10% from last year to $81.2 billion, again topping analysts’ estimates of a $76.5 billion tally.

Same sore sales were up 9.9% from last year, CVS said, while pharmacy store sales rose 10.7%. Retail sales were up 6.9% “driven by increased prescription and front store volume, including the sale of COVID-19 over-the-counter test kits, as well as pharmacy drug mix and brand inflation.” The group’s healthcare benefits division saw sales rise 9.9% to $22.51 billion.

Looking into the final months of the year, CVS said it sees profits in the region of $8.55 to $8.65 per share, 15 cent improvement from its prior forecast, with cashflows from its overall business expected to come in $1 billion higher at between $13.5 billion to $14.5 billion..

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“We delivered another outstanding quarter, and have raised full-year guidance as a result,” said CEO Karen Lynch. “We continue to execute on our strategy with a focus on expanding capabilities in health care delivery, and the announced acquisition of Signify Health will further strengthen our engagement with consumers.” 

CVS shares were marked 5.16% higher in pre-market trading immediately following the earnings release to indicate an opening bell price of $99.50 each, a move that would nudge the stock close to positive territory for the year.

CVS also unveiled details of an agreement with various state attorneys general that would see the group pay around $5 billion over the next ten years, beginning in 2023, to resolve litigation linked to the country’s opioid crisis.

“We are pleased to resolve these longstanding claims and putting them behind us is in the best interest of all parties, as well as our customers, colleagues and shareholders,” said CVS general counsel Thomas Moriarty. “We are committed to working with states, municipalities and tribes, and will continue our own important initiatives to help reduce the illegitimate use of prescription opioids.”  

Dow components Walgreens  (WBA) – Get Walgreens Boots Alliance Inc. Report and Walmart  (WMT) – Get Walmart Inc. Report are reportedly part of the overall $12 billion settlement.

Earlier this fall, CVS outbid both Amazon  (AMZN) – Get Inc. Report and UnitedHealth  (UNH) – Get UnitedHealth Group Incorporated (DE) Report in the $8 billion race to buy healthcare services specialists Signify Health  (SGFY) – Get Signify Health Inc. Class A Report.

CVS said the deal, which it expects to close early next year, will be “meaningfully” accretive to earnings as it tacks on Signify’s network of 10,000 physicians, nurse practitioners and physician assistants to its rapidly-expanding Aetna insurance business and its pharmacy benefits operations.

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