Post Earnings Coverage as CVS' Quarterly Revenue Increased 11.7%, Adjusted EPS Advanced Approximately 12%
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Upcoming AWS Coverage on Magellan Health Post-Earnings Results
LONDON, UK / ACCESSWIRE / March 1, 2017 / Active Wall St. announces its post-earnings coverage on CVS Health Corp. (NYSE: CVS). The Company released its financial results for the fourth quarter fiscal 2017 (Q4 FY17) and full year 2017 (FY17) on February 09, 2017. The Drugstore chain and pharmacy benefits manager's earnings outperformed market expectations. Register with us now for your free membership at:
One of CVS Health's competitors within the Health Care Plans space, Magellan Health, Inc. (NASDAQ: MGLN), reported its earnings for Q4 ended on December 31, 2016, on Friday, February 24, 2017. AWS will be initiating a research report on Magellan Health in the coming days.
Today, AWS is promoting its earnings coverage on CVS; touching on MGLN. Get our free coverage by signing up to:
CVS announced that net revenues for the three months ended December 31, 2016, increased 11.7% to $46.0 billion, up from $41.1 billion in Q4 2015. The Company's revenue numbers came in below market estimates of $46.51 billion. For the year ended December 31, 2016, CVS' net revenues increased 15.8% to $177.5 billion compared to $153.3 billion for FY15.
CVS' net income for Q4 2016 was $1.71 billion, or $1.59 per share, compared to net income of $1.50 billion, or $1.34 per share, during Q4 2015. The Company benefited from a lower effective income tax rate in the reported quarter of 38.0% versus 38.9% in the prior year's same period. CVS' adjusted earnings per share for Q4 2016 was $1.71 compared to $1.53 for Q4 2015, and surpassed analysts' consensus of $1.67 per share. The Company's GAAP diluted EPS for year ended December 31, 2016 was $4.91 compared to $4.62 in the prior year. Net income for the year ended December 31, 2016, was $5.3 billion, an increase of $80 million, or 1.5%.
CVS generated approximately $1.5 billion of free cash during the quarter and $8.1 billion for the full year 2016, which was above the high-end of its guidance range. In FY16, CVS returned $6.3 billion to shareholders through dividends and share repurchases. During Q4 2016, the Company repurchased 6.1 million shares for $461 million, or $75.20 per share. In FY16, CVS repurchased 48 million shares for $4.5 billion, or $96.78 per share.
Segment Results
CVS's revenues in the Pharmacy Services segment increased 17.9% to $31.3 billion in Q4 2016, primarily driven by growth in pharmacy network and specialty pharmacy claims. Pharmacy network claims processed during the reported period, increased 23.9% to 294.3 million, compared to 237.4 million in the prior year. The increase in pharmacy network claim volume was primarily due to an increase in net new business. CVS' Mail choice claims processed during Q4 2016, increased 4.7% to 23.2 million compared to 22.2 million in the prior year.
CVS' revenues in the Retail/LTC segment increased 4.7% to $20.8 billion in Q4 2016, largely driven by the addition of the pharmacies of Target Corporation, which were acquired in December 2015. Pharmacy same store prescription volumes rose 2.0% on a 30-day equivalent basis. Same store sales decreased 0.7% versus the prior year, with pharmacy same store sales up 0.2% and front store same store sales down 2.9%. Front store same store sales were negatively impacted by softer customer traffic and efforts to rationalize promotional strategies, partially offset by an increase in basket size. Pharmacy same store sales were negatively impacted for Q4 2016 by approximately 380 basis points due to recent generic introductions.
CVS reported that for Q4 2016, the generic dispensing rate increased approximately 170 basis points to 85.4% in its Pharmacy Services segment and increased approximately 120 basis points to 85.2% in the Company's Retail/LTC segment compared to the prior year.
Operating Profit
For Q4 2016, CVS' consolidated operating profit increased $266 million. Operating profit for the reported quarter increased $242 million in the Pharmacy Services segment and decreased $53 million in the Retail/LTC segment. The Pharmacy Services segment operating profit included the favorable impact of a reversal of an accrual of $88 million in connection with a legal settlement. Corporate segment operating expenses decreased $92 million from the prior year primarily due to the $90 million legal charge in the prior year associated with a disputed 1999 legal settlement.
For FY16, CVS' consolidated operating profit increased $884 million. Operating profit for the year had increased by $683 million in the Pharmacy Services segment and $151 million in the Retail/LTC segment.
Real Estate Program
During Q4 2016, CVS opened 40 new retail stores and closed 25 retail stores. In addition, the Company relocated 16 retail stores. As of December 31, 2016, the Company operated 9,709 retail stores, including pharmacies in Target stores, in 49 states, the District of Columbia, Puerto Rico and Brazil.
CVS intends to close approximately 70 retail stores during 2017 and expects to take a charge of approximately $225 million associated with the remaining lease obligations of such stores. The vast majority of the store closures are expected to occur in Q1 2017. In connection with such anticipated store closures, the Company recorded a $34 million asset impairment charge in Q4 2016.
Guidance
CVS expects to deliver GAAP diluted EPS of $5.02 to $5.18 and adjusted EPS of $5.77 to $5.93 for FY17. The Company expects to deliver GAAP diluted EPS of $0.82 to $0.88 and adjusted EPS of $1.07 to $1.13 in Q1 2017. The Company also confirmed its FY17 cash flow from operations guidance of $7.7 billion to $8.6 billion and free cash flow guidance of $6.0 billion to $6.4 billion.
Stock Performance
At the close of trading session on Tuesday, February 28, 2017, CVS Health's stock price slipped 1.02% to end the day at $80.58. A total volume of 7.27 million shares were exchanged during the session. The Company's share price has gained 9.46% in the past three months and 2.73% on YTD basis. The stock is trading at a PE ratio of 16.35 and has a dividend yield of 2.48%. Additionally, the stock currently has a market cap of $85.74 billion.
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