CVS Meets Q4 Expectations

For the fourth quarter ended December 31, 2015, CVS Health Corp. posted company income from continuing operations of $1.5 billion, or $1.34 per diluted share, versus $1.32 billion, or $1.14, in the year-prior period. Adjusted earnings per share for the quarter was $1.53 versus $1.21 in the period a year earlier.

Adjusted earnings per share matched a Zacks Investment Research analyst average estimate.

Operating profit in the retail/long-term care segment grew 19.8%, excluding integration costs of $52 million related to the Omnicare acquisition.

Comparable store sales in the retail/LTC segment increased 3.5% versus the prior-year period, with pharmacy comps up 5% and front store comps, including general merchandise such as home goods, down 0.5%. Softer customer traffic, partially offset by an increase in basket size, hurt front-end comps.

Revenues in the retail/LTC segment increased 12.5% to $19.9 billion in the quarter year over year, CVS stated. About half the revenue increase was driven by the addition of long-term care operations acquired as part of the company’s Omnicare purchase. Company net revenues in the fourth quarter increased 11% to $41.1 billion versus the period a year prior, the company maintained.

For the full fiscal year, income from continuing operations was $5.23 billion, or $4.63 per diluted share, versus $4.65 billion, or $3.96 per diluted share, in the 2014 period. Full-year operating profit in the retail/LTC segment grew 6.4% versus fiscal 2014, excluding acquisition-related integration costs of $64 million, according to CVS.

Comps advanced 1.7% year over year, with pharmacy comps up 4.5% and front store comps down 5%, CVS noted. Front-end comps suffered an estimated 520 basis point decline due to the CVS initiative ending tobacco sales, the company added. The estimate includes direct revenue and associated basket sales.

Total net revenues in the retail/LTC segment gained 6.2% to $72 billion, CVS said. Total company net revenues increased 10% to $153.3 billion versus the 2014 fiscal year.

Larry Merlo, CVS president and CEO, said, “We enjoyed a successful year in 2015, highlighted by excellent performance across our enterprise and two key acquisitions that support our strategy for growth. We grew our core business with the acquisition of Target’s pharmacies and clinics and expanded our reach with the acquisition of Omnicare, the leader in long-term care pharmacy. At the same time, we achieved solid year-over-year growth in revenues, operating profit and earnings per share. We also generated $6.4 billion in free cash flow for the full-year, exceeding our expectations. Through dividends and share repurchases, we returned more than $6 billion to our shareholders in 2015. As expected, growth in the fourth quarter was especially strong, with revenues increasing 11% and adjusted EPS increasing 26.5%, right in line with our guidance.”

The company operates 9,655 retail stores, including pharmacies in Target stores, in 49 states, the District of Columbia, Puerto Rico and Brazil.