CVS expects higher revenue as it expands health services
CVS Health Corp. said Thursday that it anticipates higher revenue and profit this year than previously expected as it expands health care services at its national network of pharmacies.
“This year our businesses have been growing faster than the market,” Chief Executive Officer Karen Lynch told industry analysts at the company’s investor day in New York City.
CVS, the parent company of health insurer Aetna, said it expects revenue of at least $290.3 billion, up from previous guidance of between $286.5 billion and $290.3 billion. It expects adjusted operating income of at least $16.6 billion, to increase from $16.4 to $16.6 billion.
And it expects revenue next year of between $304 billion and $309 billion, up as much as 6.5% from this year, and earnings per share of between $8.10 and $8.30 in 2022. That’s in line with analysts’ expectations of $8.23 a share, according to Zacks Investment Research.
Shares jumped on CVS’ bullish outlook, up 4.5%, ending the day at $97.31.
The Woonsocket, Rhode Island, pharmacy and health insurance giant said it will increasingly use its stores to focus on advanced primary care centers, enhanced health hub locations and traditional CVS pharmacies.
The health-hub sites are intended to help patients manage chronic conditions and advance nutritional health. CVS also will embed mental health services into its primary care offering.
“Mental health is an unmet need and it is clearly one of the biggest collateral damages of the pandemic,” Lynch said.
The chain’s retail stores are the “front door” to the CVS brand, and customers and are the “backbone of a health care platform that’s national in scope, but local in feel,” Chief Financial Officer Shawn Guertin said.
“The successful expansion into care delivery and health care services opens up large addressable markets with multiple avenues for growth and entirely new revenue sources for us and it has the potential to accelerate growth in our foundational business,” he said.
CVS expects COVID-19 will have a negative impact in its health care benefits segment next year, but will be significantly less than in 2021, Guertin said.
CVS announced last month that it will close 900 stores and focus more on health care. Lynch said the decision was linked to changes in consumer health, buying needs and shifts in the U.S. population. CVS looked at changing demographics, where Aetna/caremark pharmacy members are and a financial analysis to reduce store density. It also avoided shutting stores in poor communities, she said.
Citing an “incredibly tight labor market,” Lynch said CVS’S pledge in August to pay workers at least $15 an hour by mid-2022 is a “first step and it likely won’t be the last step.”
Lynch said the rising cost of health care in the U.S. is “untenable for a majority of Americans,” with health spending expected to grow an average of 5.5% through 2027.