Financial Performance

CVS Health Shares Dip 8% on Guidance Miss

“People are finally starting to understand that this isn’t a transition year [for CVS], it’s a transition decade,” one analyst says.
Matthew HellerFebruary 20, 2019
CVS Health Shares Dip 8% on Guidance Miss

Shares of CVS Health tumbled on Wednesday after the company issued lower-than-expected guidance, raising concerns about its “health care first” strategy amid pressures on its core businesses.

For 2019, CVS said it expected adjusted earnings of $6.68 to $6.88 per share, well below the $7.41 per share analysts had expected.

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CFO Eva Boratto also told analysts in an earnings call that the company anticipates integration costs from its $70 billion acquisition of Aetna — the cornerstone of its strategy of diversifying away from retail pharmacy services to become “America’s front door to quality health care” — to total $550 million this year.

“2019 will be a year of transition as we integrate Aetna and focus on key pillars of our growth strategy,” CVS chief executive Larry Merlo said in a news release.

He said the company was “fully aware of the need to address the impact of certain headwinds that are having a disproportionate impact in 2019 compared to prior years … and we are confident that our actions will position us well in 2020 and beyond.”

Wall Street appeared skeptical as CVS shares fell 8% to $64.24 in trading Wednesday — on pace for their worst day since Nov. 8, 2016. “People are finally starting to understand that this isn’t a transition year, it’s a transition decade,” Robert W. Baird & Co. analyst Eric Coldwell said.

According to CNBC, investors are concerned about “whether the Aetna acquisition can really help CVS navigate the tough realities of the retail pharmacy and pharmacy benefit management businesses.”

Pharmacies have been experiencing reimbursement pressure amid questions about how much they get paid for filling drug prescriptions while CVS’ long-term care unit has also been a drag on its financial results.

In the fourth quarter, CVS reported a net loss of $421 million, or 37 cents per share, down from a profit of $3.29 billion, or $3.22 per share, a year earlier, reflecting in part a $2.22 billion goodwill impairment charge related to the long-term care business.

On an adjusted basis, the company earned $2.14 per share, beating analysts’ estimates of $2.05 per share.