February 20, 2019

CVS’ 4Q revenue hike offset by struggling long-term care unit

Photo | CNN Money
Photo | CNN Money
A CVS storefront.

CVS Health, which recently acquired Hartford health insurer Aetna, on Wednesday said its higher fourth-quarter revenues were squandered by a $2.2 billion charge against its long-term care business.

For the three months ended Dec. 31, the Rhode Island-based drugstore chain and pharmacy benefits manager reported a loss of $421 million, or a loss of 37 cents a diluted share, down from a profit of $3.2 billion, or $3.22 a diluted share, in the same period in 2017.

During the quarter, CVS said its revenues jumped 12.5 percent to $54.4 billion, up from $48.4 billion in the fourth quarter of 2017.

But the revenue hike was offset by soaring operating expenses of its long-term care unit, Omnicare Inc., which CVS said hasn't performed as well as it hoped when the company acquired it for $12.7 billion in 2015. Omnicare's challenges include lower occupancy rates in skilled nursing homes and several customers suffering from bankruptcies in 2018, CVS said.

Still, CVS said revenues in 2018 climbed 5.3 percent to $194.6 billion.

The company expects earnings this year in the range of $6.68 to $6.88 a diluted share.

CVS CEO Larry Merlo in a statement called 2018 a "milestone year" for the pharmacy giant due to its $69 billion buyout of Aetna, a combination that will save the companies $750 million in overhead costs.

CVS also recently unveiled its newly piloted "HealthHub" stores, which offer a suite of health care services at reimagined drug stores in Houston, Texas. The new storefronts are part of Merlo's ambitious plan to convert the company's 9,800 stores into "healthcare destinations"

Although the CVS-Aetna merger consummated in November, a federal judge is still reviewing the antitrust settlement DOJ agreed to with the companies in October.

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