CVS Health’s 2016 outlook disappoints Wall Street

CVS Health shares that hit an alltime high price three months ago tumbled Friday after the drug store chain and pharmacy benefits manager surprised Wall Street with a 2016 profit forecast that fell well below expectations.

The Woonsocket, R.I., company also detailed third-quarter earnings that missed analyst forecasts.

CVS executives preached patience Friday after forecasting adjusted 2016 earnings of between $5.68 and $5.88 per share. Analysts expected, on average, earnings of $5.99 per share, according to FactSet.

CVS leaders said on a conference call with analysts that their company is feeling immediate pressure from payers like health insurers and the government programs Medicare and Medicaid over the reimbursement it receives for filling prescriptions, while the business gains it is reaping will take time to develop.

CVS Health operates the nation’s second-largest drugstore chain and one of the biggest pharmacy benefits management businesses.

The company said it has gained some large clients for its pharmacy benefits management, or PBM, business, but it takes time to implement programs like Maintenance Choice that will pull additional profits from that new business. Maintenance Choice allows patients to fill 90-day prescriptions delivered through the mail or pick them up at CVS stores for the same price.

In the third quarter, CVS Health earned $1.24 billion, not counting $10 million in discontinued operations. That compares to $948 million in last year’s quarter, when the company absorbed a $521-million loss on the early retirement of some debt.

Earnings, adjusted for one-time gains and costs, came to $1.28 per share. That fell two cents short of the average analyst expectation, according to Zacks Investment Research.

But the company’s revenue grew 10 percent to $38.64 billion, which topped the average analyst forecast for $37.76 billion.

CVS Health runs 7,911 drugstores in 44 states, the District of Columbia and Brazil. Its earnings announcement came a couple days after larger competitor Walgreens Boots Alliance Inc. announced plans to get even bigger in the United States by adding Rite Aid Corp.’s 4,600 stores to its portfolio of more than 8,000.