Revenues increased 35.2% to $63.4 billion.
WOONSOCKET, R.I.— CVS Health stock rose nearly 6% in pre-market trading on Wednesday after the company reported strong second quarter operating results for the three months ending June 30, 2019. Second quarter earnings beat Wall Street’s expectations and the company significantly raised its own projection for full-year earnings.
“We posted strong second quarter results, with all of our businesses performing at or above expectations,” said president and chief executive officer Larry Merlo. “These results demonstrate our ability to execute on our strategic priorities to accelerate enterprise growth as we seek to fundamentally transform the consumer health experience. Given our performance to date and our expectations for the remainder of the year, we are raising and narrowing our adjusted EPS guidance range to $6.89 to $7.00.”
“We made meaningful advancements on each of the priorities we outlined at our Investor Day in early June to differentiate, transform and modernize the delivery of care. While still early, we remain confident that we will be able to realize the potential of our innovative and powerful new business model to deliver enhanced value to our clients and the consumers we serve,” he added.
Total revenues and adjusted revenues increased 35.2% and 35.8%, respectively, compared to the prior year. Revenue growth was primarily driven by the acquisition of Aetna, which took place last November, as well as increased volume and brand name drug price inflation in both the Pharmacy Services and Retail/LTC segments. The revenue increase was partially offset by continued reimbursement pressure in Retail/LTC, price compression in Pharmacy Services, and an increased generic dispensing rate.
Operating expenses and adjusted operating expenses increased 65.2% and 59.1%, respectively. The increase in operating expenses was due to the impact of the Aetna acquisition, an increase in intangible amortization related to the Aetna acquisition and an increase in acquisition-related integration costs. The increase in adjusted operating expenses was primarily driven by the impact of the Aetna acquisition.
Total revenues for Pharmacy Services increased 4.2%, primarily due to brand name drug price inflation as well as increased total pharmacy claims volume, partially offset by continued price compression and an increased generic dispensing rate.
Total pharmacy claims processed increased 4% on a 30-day equivalent basis, due to net new business and the continued adoption of Maintenance Choice offerings.
Retail/LTC total revenues increased 3.7%, primarily driven by higher prescription volume and brand name drug price inflation, partially offset by continued reimbursement pressure and the impact of generic drug introductions.
Front-store revenues represent about 22.7% of total Retail/LTC revenues. Front-store revenue increases were driven by growth in health product sales, which benefited from an extended cough and cold season and the impact of the shift of sales associated with the Easter holiday from the first quarter of 2018 to the second quarter of 2019.
Total revenues for the Health Care Benefits segment increased $16.6 billion, due to the acquisition of Aetna.
CVS confirmed its full-year 2019 consolidated GAAP operating income guidance range of $11.8 billion to $12.0 billion and raised the guidance range for full-year adjusted operating income to $15.2 billion to $15.4 billion from $15.0 billion to $15.2 billion. The company also raised and narrowed the GAAP diluted EPS from continuing operations guidance range to $4.93 to $5.04 from $4.90 to $5.05, and raised and narrowed the adjusted EPS guidance range to $6.89 to $7.00 from $6.75 to $6.90.