An apple a day may keep the doctor away, but if it’s investors one is hoping to make happy, consider buying an insurance company.
That could be one take away from CVS’ latest 3Q earnings release, which managed to come in ahead of analyst expectations on Wall Street, despite weak retail sales.
Earnings per share locked in at $1.50 instead of $1.48, while revenue was $46.2 billion — as opposed to the $46.17 forecast — and up 3.5 percent from the same quarter last year.
Net income, however, fell to $1.29 billion, or $1.26 per stock, from $1.54 billion, or $1.43 a share, a year earlier.
CVS has been on a mission to reset from a retail pharmacy to a healthcare business for years, propelled by its acquisition of the Caremark pharmacy benefit manager (PBM) platform in 2007. That PBM business netted sales of $32.9 billion — roughly 70 percent of its sales — up 8.1 percent from the quarter before.
Profitability in the division, though, was hurt by pressure on drug prices.
But CVS reportedly has a strategy for that: buying out an insurer like Aetna, which could give the company greater bargaining power with drug companies.
That power-play might be ever more necessary going forward, as CVS’ retail business is continuing to show signs of decline — down 2.8 percent.
Additionally, CVS faces the possibility of selling prescription drugs in a head-to-head pharmacy competition with Amazon, which is always a terrifying possibility for any retailer that isn’t Walmart.
CVS narrowed and raised the midpoint of the range for full-year adjusted earnings per stock from $5.87 to $5.91.