NEW YORK (AP) CVS Health swung back to a profit in the second quarter, thanks to an influx of health insurance revenue, and the company raised its 2019 forecast beyond Wall Street expectations.
Shares of the drugstore chain and pharmacy benefit manager outpaced the broader market in Wednesday trading after the company detailed its better-than-expected quarterly performance.
Total revenue climbed over 35% to $63.43 billion in the three-month period that ended June 30, helped by a $17-billion contribution from a new health benefits segment.
CVS Health completed a roughly $69-billion acquisition of the insurer Aetna last November, adding coverage for nearly 23 million people to a corporate profile that already includes one of the country’s largest drugstore chains and pharmacy benefit management businesses.
That deal, part of which is still being reviewed by a federal judge, helped CVS health bring in $1.94 billion in net income after booking a loss in last year’s quarter due to a big charge from its long-term care business.
Aetna would advance the CVS goal of providing more care and services that help people stay healthy. The company is doing more work to help people stay on their medications and expanding its prescription delivery and home care services.
It also said in June that it would expand a new store format that provides dietitians, helps people monitor chronic diseases and includes community rooms that can be used for things like yoga classes.
In contrast, like other drugstore chains, CVS is easing off new store openings as a source of growth. A CVS Health executive told analysts Wednesday that the company used to open about 300 new stores annually a few years ago but expects that total to fall to only around 50 next year.
Rival drugstore chain Walgreens said Tuesday that it will close 200 of its U.S. stores in order to cut costs.
CVS Health Corp., based in Woonsocket, Rhode Island, runs more about 9,900 retail locations and processes over a billion prescriptions annually as a pharmacy benefit manager.
In the second quarter, company earnings adjusted for one-time items totaled $1.89 per share, which was 19 cents better than expected, according to a survey by Zacks Investment Research. Analysts also expected, on average, revenue of $62.61 billion.
CVS Health draws most of its revenue from its pharmacy benefit management side, which runs prescription drug plans for customers like insurers and employers. Revenue from that segment climbed 4% in the quarter as the company processed more claims and also benefited from increases in brand name drug prices.
An increase in prescriptions also helped revenue from established stores climb 4% on the drugstore side. That’s an important metric because it excludes recently opened or closed locations.
CVS Health said that it now expects 2019 adjusted earnings to range between $6.89 and $7 per share.
For the full year, Wall Street expected earnings of $6.84 per share for the full year, according to FactSet.
Company shares rose nearly 6%, or $3.14, to $57.25 in late morning trading while broader indexes fell.
The stock price had fallen 17% so far this year as of Tuesday. Shares still hadn’t recovered from a dip they took in February after the company set initial expectations for 2019 below Wall Street forecasts.