(Bloomberg) — CVS Health Corp.’s first-quarter profit beat analysts’ estimates, helped by higher prescription claims and the acquisition of a nursing-home pharmacy business.
Earnings were $1.18 a share, excluding one-time items, the company said in a statement Tuesday. That compared with the $1.16 average of predictions compiled by Bloomberg.
CVS (NYSE:CVS) has bulked up through acquisitions to expand its presence in more pharmacy businesses as drug reimbursement rates decline. Revenue from nursing-home pharmacy Omnicare, bought in August for $12.9 billion, was a main driver of sales growth. CVS also acquired the pharmacy locations inside Target Corp. stores for $1.9 billion last year.
The shares were up 2.3 percent to $103.76 at 11:22 a.m. in New York.
CVS’s net income declined 6.1 percent to $1.15 billion, or $1.04 a share, from $1.22 billion, or $1.07 a share, a year earlier, driven by an increase in interest expense from debt it took out to finance its acquisitions as well as acquisition related integration costs. Revenue at the Woonsocket, Rhode Island-based company rose 19 percent to $43.2 billion.
The company “had a reasonable start to the year, with strong revenue growth in pharmacy services,” said Ross Muken, an Evercore ISI analyst, in a note to clients. The increase was driven by “solid” growth in prescription claims, he said.
The company also said:
Same-store sales increased 4.2 percent, with 1.25 percentage points of the increase due to the extra day in 2016 because of the leap year. 2016 adjusted EPS forecast range remains at $5.73 to $5.88. Pharmacy network claims in its drug benefit business increased 23 percent to 283 million claims, mostly due to new business.
CVS’s competitors are getting bigger. UnitedHealth Group Inc.’s pharmacy arm, OptumRX, bought drug benefit manager Catamaran Corp. last July. And Walgreens Boots Alliance Inc.’s agreement last year to purchase Rite Aid Corp. could lower CVS’s market share in the retail-pharmacy market.
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