Why Solid CVS Health Earnings Are Not Enough

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When CVS Health Corp. (NYSE: CVS) reported its third-quarter financial results early Monday, the company said that it had $1.50 in earnings per share (EPS) on $46.2 billion in revenue. That compares to consensus estimates from Thomson Reuters that called for $1.49 in EPS on revenue of $46.17 billion. In the same period of last year, the drug store operator posted EPS of $1.64 and $44.62 billion in revenue.

During the quarter, revenues in the Pharmacy Services Segment increased 8.1% to approximately $32.9 billion. Pharmacy network claims processed increased 8.3% on a 30-day equivalent basis, to 374.2 million, compared to 345.7 million in the prior year. Revenues in the Retail/LTC Segment decreased 2.7% to $19.6 billion.

Pharmacy same-store sales decreased 3.4% and front store same-store sales declined 2.8%.

In terms of guidance for the fourth quarter, CVS expects to see EPS in the range of $1.88 to $1.92. The consensus estimates call for $1.91 in EPS and $47.67 billion in revenue for the current quarter.

On the books, CVS cash, cash equivalents and short-terms investments totaled $2.56 billion at the end of the quarter, down from $3.46 billion at the end of the previous fiscal year.

Larry Merlo, president and CEO, commented:

The solid third quarter results we posted today keep us well on track to achieve our full-year targets. While operating profit in the Retail/LTC Segment was impacted by the devastating hurricanes, operating profit in the Pharmacy Services Segment was in line with expectations. At the same time, we continued to deliver substantial free cash flow and return significant value to our shareholders through dividends and share repurchases.

Shares of CVS Health were last seen at $67.33, down about 2.8% on the day. The consensus analyst price target is $86.75 and the 52-week trading range is $66.57 to $84.72.