Please ensure Javascript is enabled for purposes of website accessibility

How CVS Health Beat Expectations in Q1

By Keith Speights - May 4, 2021 at 10:45AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

All of the company's segments delivered solid growth.

CVS Health (CVS -0.74%) has taken investors on something of a roller-coaster ride this year. Its shares have swung up or down by at least 10% three times. But it's been a fun ride overall so far.

CVS Health announced its first-quarter results before the market opened on Tuesday. The healthcare stock jumped more than 3% in early trading. Here are the highlights from CVS' Q1 update.

Pharmacist speaking with customer at pharmacy counter.

Image source: Getty Images.

By the numbers

CVS Health reported first-quarter revenue of $69.1 billion. This reflected a 3.5% increase from the prior-year period revenue total of $66.8 billion. The consensus among Wall Street analysts projected Q1 revenue of $68.39 billion.

The company announced first-quarter net income of $2.2 billion, or $1.68 per share, based on generally accepted accounting principles (GAAP). In the prior-year period, CVS posted GAAP earnings of $2 billion, or $1.53 per share.

CVS Health's adjusted net income in the first quarter came in at $2.04 per share, up from $1.91 per share in the prior-year period. This result easily beat analysts' average adjusted earnings estimate of $1.71 per share.

Behind the numbers

The company achieved growth across all of its businesses in the first quarter. CVS Health's healthcare benefits segment, which includes Aetna, delivered the strongest performance. Revenue for the segment jumped 6.7% year over year to $20.5 billion. This increase was fueled primarily by growth in the company's Medicare and Medicaid business.

Pharmacy services remained CVS Health's biggest revenue generator, though. Total revenue for the segment rose 3.8% year over year to $36.3 billion. The company attributed this growth to net new business, especially with its specialty pharmacy, along with a change in product mix and price increases for brand drugs. However, growth was also negatively impacted by a weak cough, cold, and flu season and by overall price compression.

CVS Health's retail/LTC (long-term care) segment recorded revenue of $23.3 billion in the first quarter, up 2.3% year over year. COVID-19 diagnostic testing and vaccinations provided a nice tailwind for the segment. Sales also increased due to higher brand-drug prices.

This growth was offset to some extent, though, by decreased front-store sales. The main reason for this decline was that sales in the prior-year period were artificially higher due to consumers stocking up during the early days of the COVID-19 pandemic. The weak cough, cold, and flu season also dampened retail sales, as did continued reimbursement pressure and the negative impact of recent generic-drug launches.

Looking ahead

CVS Health raised its full-year 2021 guidance after its solid Q1 results. The company now projects GAAP earnings per share will be between $6.24 and $6.36, up from its previous forecast of $6.06 to $6.22. Non-GAAP earnings per share are expected to be between $7.56 and $7.68, up from the previous guidance of $7.39 to $7.55.

COVID-19 is likely to still play a key role in the company's fortunes throughout the rest of this year. CVS Health's retail business could benefit from the recent launches of three over-the-counter COVID-19 tests that don't require prescriptions.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

CVS Health Corporation Stock Quote
CVS Health Corporation
CVS
$92.66 (-0.74%) $0.69

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
317%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.