CVS health Reported a better-than-expected 3.5% jump in sales in the third quarter and raised its profit forecast for 2020 on Friday as the plan to transform the drugstore chain into a healthcare services company pays off.
The healthcare company offered everything from insurance to Covid-19 testing and also appointed a new CEO. Karen Lynch becomes CEO on February 1st. She is currently Executive Vice President of CVS Health and President of Aetna. the health insurer that CVS acquired in 2018.
The company’s longtime CEO, Larry Merlo, will step down but serve on CVS ‘board of directors.
In pre-market trading, the shares rose by around 5%.
CVS aims to become a unique healthcare destination as competitors infiltrate its turf by filling out prescriptions and selling drugstore items online. The company is redesigning hundreds of its stores to turn them into one-stop shops for medical services and products like blood tests and sleep apnea machines.
According to Merlo, CVS will have around 600 HealthHUBs by the end of the year. There are currently nearly 450 stores in 30 states. Starting January, personal behavioral health services will be added to these stores.
On a winning call, Merlo said the addition of Covid-19 tests “is very tangible evidence that our strategy is coming to life in very meaningful ways”.
“If we had told you a year ago that by now 6 million people had gone to their local CVS pharmacy for a diagnostic test for a virus, I would probably get an eyeball roll,” he said. “The reality is that this has happened, and it really speaks for the strategy we were talking about for meeting people where they are.”
Here’s how the company reported for the quarter ended September 30, versus analyst expectations based on a survey of analysts by Refinitiv:
- Adjusted earnings per share: $ 1.66 adjusted versus $ 1.33 expected
- Revenue: $ 67.06 billion versus $ 66.66 billion expected
On an unadjusted basis, the healthcare company and drugstore chain reported net income of $ 1.22 billion, or 93 cents per share, for the third quarter, compared to $ 1.53 billion or $ 1.17 per share a year earlier.
Revenue increased 3.5% from $ 64.81 billion a year ago to $ 67.06 billion. It also surpassed what analysts had expected to be $ 66.66 billion.
At the company’s drugstores, sales increased both in the pharmacy and at the front of the store as customers filled out more prescriptions, received Covid-19 tests, and filled larger baskets of over-the-counter items.
The number of prescriptions prescribed rose 30 days year over year to 4.6% in the quarter. Front store sales increased 2.7% year over year for the quarter.
CVS increased its guidance for full year earnings per share from $ 5.16 to $ 5.29 to $ 5.60 to $ 5.70 and its guidance for adjusted earnings per share for full year 2020 to $ 7.14 to $ 7.27 to $ 7.35 to $ 7.45.
Cash flow for the full year would be between $ 12.75 and $ 13.25 billion, above the previous outlook of between $ 11 and $ 11.5 billion.
The company warned that there are still uncertainties due to the Covid-19 pandemic.
CVS has expanded Covid-19 testing, got flu shots and prepared for the coronavirus vaccine launch during the pandemic. The company has more than 4,000 drive-through checkpoints in its pharmacies and has performed more than 6 million tests. The company plans to have nearly 1,000 rapid test sites by the end of the year.
Since March, CVS has hired approximately 76,000 full-time, part-time and temporary workers. It has around 300,000 employees.
Said it last month planned to add even more workers. It said it would hire 15,000 people immediately – the majority are pharmacy technicians – to prepare for an expected increase in Covid-19 and flu cases this fall and winter.