CVS Posts Healthy First Quarter

For the first quarter ended March 31, CVS Health Corp. posted company net income of $1.15 billion, or $1.04 per diluted share, versus $1.22 billion, or $1.07 per diluted share, in the year-earlier period.

Adjusted income per share for the first quarter was $1.18 versus $1.14 in the prior-year period. CVS adjusted income per share beat an analyst average estimate published by MarketBeat by two cents.

First quarter net income slipped primarily because of a $149 million increase in interest expense and $61 million of acquisition-related integration costs, partially offset by an increase in operating profit. The increase in interest expense is primarily due to the issuance of $15 billion of long-term debt in 2015 that was used to acquire Omnicare and Target Corp. pharmacies and clinics, as well as debt assumed in the Omnicare acquisition. Adjusted income per share excludes the $61 million of acquisition-related integration costs, CVS maintained, and a $3 million legal charge related to a legacy lawsuit challenging a 1999 settlement by MedPartners of various securities class actions and a related derivative claim.

In the retail/LTC segment, revenues increased 18.6% to $20.1 billion for the quarter year over year, while comparable store sales advanced 4.2%. Front store comps, including those from general merchandise such as home furnishings and housewares, increased 0.7%, negatively affected by softer customer traffic offset by an increase in basket size, the shift of Easter from April in 2015 to March in 2016 and a 105 basis points lift from the additional leap year day in 2016.

Overall net revenues were $43.22 billion versus $36.33 billion in the previous-year quarter. Operating profit was $2.18 billion compared with $2.13 billion in the 2015 period. Excluding the $61 million in acquisition-related integration costs and the $3 million legal charge, operating profit increased from $2.13 billion in the 2015 first quarter to $2.24 billion in the 2016 period.

Larry Merlo, CVS president and CEO, said, "We posted solid results this quarter and are off to a strong start in 2016. Operating profit in the retail business was in line with our expectations."

During the quarter, the company opened 24 new retail stores and closed five retail stores. CVS operates 9,674 retail stores, including pharmacies in Target stores, in 49 states, the District of Columbia, Puerto Rico and Brazil.