Image source: CVS Health.

CVS Health Corporation (CVS -1.58%) shares got off to a less-than-stellar start so far in 2016 -- as of Wednesday, Feb. 10, they're down roughly 4.5% since Jan. 1. Investors hoping for the large pharmacy-services company to turn things around might now have some reason to be encouraged. CVS Health announced its fourth-quarter financial results after the market closed on Tuesday. Here are the highlights. 

CVS Health results: The raw numbers


Q4 2015 Actuals

Q4 2014 Actuals

Growth (YOY)


$41.1 billion

$37.1 billion


Net Income From Continuing Operations

$1.5 billion

$1.3 billion


Adjusted EPS




Data source: CVS Health

What happened with CVS Health this quarter?
The fourth quarter contained plenty of positives for CVS Health, with double-digit year-over-year growth on both the top and bottom lines. Key items of note from the quarter included:

  • Solid pharmacy services revenue growth of 11.1%, driven largely by CVS Health's specialty pharmacy business.
  • Pharmacy network claims processed growth of 7.2%, stemming primarily from net new business
  • Retail/long-term care revenue jumped 12.5% year over year, with around half of the growth due to CVS' acquisition of Omnicare.
  • Same-store sales rose 3.5% compared to the fourth quarter of 2014.
  • Generic dispensing rate increased by around 165 basis points to 83.7%.

CVS Health confirmed its previous guidance for both full-year and first-quarter 2016. The company expects adjusted earnings of $5.73 to $5.88 per share for 2016, with GAAP earnings from continuing operations of $5.28 to $5.43 per share. For first quarter, CVS projects adjusted earnings of $1.14 to $1.17 per share with GAAP earnings from continuing operations of $1.03 to $1.06 per share.

What management had to say
Larry Merlo, CVS Health's president and CEO, liked what he saw from fourth-quarter and full-year 2015. Merlo stated, "We enjoyed a successful year in 2015, highlighted by excellent performance across our enterprise and two key acquisitions that support our strategy for growth." Underscoring the company's focus on shareholders, Merlo noted that "through dividends and share repurchases, we returned more than $6 billion to our shareholders in 2015."

Merlo also has positive expectations moving forward. He said:

We continue to win and gain share across our businesses, and I'm very pleased with the outstanding PBM selling season we had for 2016, with gross client wins of $14.8 billion. Our growth in the fast-growing specialty market continues to outpace the industry. Overall, our leadership in multiple competencies enables us to provide superior value for patients, payers, and providers. We firmly believe that we have the right strategy for success in the evolving healthcare marketplace.

Looking forward
One key development for investors to watch is how well CVS integrates the pharmacies bought last year from Target (TGT -3.04%). This acquisition of 1,672 pharmacies in Target stores closed in December. CVS Health also picked up 79 Target clinics, which are being rebranded as MinuteClinics. 

The added Target locations gives CVS Health a big boost in volume, which it should be able to leverage in obtaining lower drug-acquisition costs. If CVS is successful on this front, that should lead to higher earnings.

From a strategic standpoint, the added clinics could allow CVS Health to deliver in a greater way on its goal to becoming more of an integrated healthcare company instead of only a pharmacy-services provider. CVS Health plans to open up to 20 new MinuteClinics in Target stores over the next three years.

CVS Health shares were up nearly 1% in after-hours trading on Tuesday. With a strong fourth quarter behind it, as well as the possible opportunities from the Target pharmacies and clinics acquisition, there appears to be reason to hope that 2016 will end up better than it began for CVS shareholders.