CVS Health (CVS) Q2 2022 Earnings

CVS Health (CVS) Q2 2022 Earnings

People walk past a CVS Pharmacy store in Manhattan, New York.

Shannon Stapleton | Reuters

CVS Health on Wednesday raised its full-year revenue forecast after beating Wall Street expectations for the second quarter.

The healthcare company said it now expects full-year adjusted earnings per share to be between $8.40 and $8.60, compared with an earlier estimate of between $8.20 and $8.40.

Shares of CVS gained more than 6% on Wednesday.

Here’s what the company reported for the three-month period ended June 30, compared with what analysts expected, based on a survey of analysts by Refinitiv:

  • Earnings per share: $2.40 adjusted vs. $2.17 expected
  • Revenue: $80.64 billion vs. $76.37 billion expected

On an unadjusted basis, CVS reported net income of $2.95 billion, or $2.23 per share, up from $2.78 billion, or $2.10 per share, a year earlier. Revenue of $80.64 billion also marked a year-over-year increase from $72.62 billion in the same period in 2021.

The results cover several different segments of CVS’s healthcare business. It has a huge drugstore footprint, owns insurer Aetna and pharmacy benefit manager CVS Caremark, and provides patient care through MinuteClinics in its stores.

CEO Karen Lynch said the company’s strategy of adding more health services is boosting sales and deepening customer relationships.

“Our team is making significant progress on our strategy as we strive to become the nation’s leading healthcare solutions company,” she said on the earnings call. And she added that the company will “continue to build on this powerful momentum.”

Increasing foot traffic, rising prices

Customers are making more frequent visits to CVS stores and buying more when they do, the company said. CVS saw a mid-single-digit increase in trips and a mid-single-digit increase in average basket size in the quarter, Chief Customer Officer Michelle Peluso said during an earnings call.

Same-store sales were up 8% year-on-year as customers bought home Covid test kits and cough, cold and flu medicines. That far exceeded the expected same-store sales decline of 0.3%, according to StreetAccount consensus estimates.

At the pharmacy, same-store sales were up 7.6%. On the store front, same-store sales jumped 9.4%.

Some of these gains come from rising prices. CVS has been able to pass on inflation-related higher costs to shoppers in most cases, Peluso said. However, she said the company “wants to make sure there is value on the shelf at all times for our customers.”

CVS private labels are among those budget-friendly options. She said her store brands average 20 percent to 40 percent less than national brands.

With personalized coupons and the membership program, CarePass, customers can cut prices even further, Peluso said. The program, which offers discounts, free one- or two-day shipping and other perks, costs $5 per month or $48 annually.

CarePass membership is up 26 percent year-over-year, she said.

Total pharmacy claims processed rose 3.9% on a 30-day equivalent basis for the three months ended June 30, compared to a year earlier. This is due to the extended cough, cold and flu season compared to the same quarter in 2021.

Pandemic sales

Although sales increased for the quarter, CVS said in a news release that the growth was partially offset by a decline in Covid testing and vaccinations, the introduction of new generic drugs and pressure on pharmacy reimbursements.

CVS administered more than 4 million Covid tests and about 6 million Covid vaccinations during the three-month period, Lynch said during the earnings call. That’s down from more than 6 million tests and more than 8 million vaccines given in the first quarter.

One aspect of Covid care has increased, however: Lynch said demand continues to grow for antiviral drugs to treat Covid infections.

Pandemic-related services remain big business for CVS, even as testing and vaccination volumes decline.

Chief Financial Officer Sean Guertin said on the call that the company expects to administer nearly 20 million Covid vaccinations this year, with roughly 75% of those already administered. He said he expects to provide about 19 million tests and sell more than 50 million over-the-counter test kits, more than double the number sold the previous year.

In total, he said those three categories would generate nearly $3 billion in revenue — down about 33 percent from the previous year. He said CVS is poised to spend more in the last half of the year as it prepares for a potential spike in Covid cases.

Plus, Guertin said, pandemic-related items are driving storefront traffic and sales. He attributed about 60% of the company’s retail excellence to “Covid categories”.

Read the company’s earnings release here.

Leave a Comment

Your email address will not be published.