Angelica LaVito@ANGELICALAVITO June 4, 2019
KEY POINTS
·
CVS Health gave long-term financial forecasts Tuesday at its
annual investor day.
·
Shareholders have pressed CVS for more insight into the
company’s long-term earnings prospects.
·
CEO Larry Merlo said CVS is in the “early innings” of
integrating its newly acquired Aetna business.
CVS
Health tried to allay investor concerns Tuesday over its $70
billion acquisition of health insurer Aetna last year, projecting double-digit
growth after the two companies are fully integrated in a few years.
The company reiterated its
2019 forecast of earnings between $6.75 and $6.90 per share, compared with the
$6.85 analysts polled by Refinitiv are expecting. For 2020, CVS expects
adjusted earnings of “at least” $7, it told investors at its annual investor
day in New York. Analysts anticipate $7.22 a share.
For 2021, CVS “mid-single
digit percent” adjusted earnings. In 2022 and the following years, CVS expects
“low-double digit percent” growth. Shares of the company rose 3.6% in morning
trading.
Investors have pressed for
more clarity around the company’s long-term financial prospects, especially
after executives warned of headwinds earlier this year. J.P. Morgan analysts
surveyed investors ahead of analyst day and found long-term financial guidance
was the the most important thing respondents said they wanted to learn Tuesday.
“Keep in mind we’re in the
early innings of our transformational journey,” CVS CEO Larry
Merlo told investors. “This will be a multi-year journey with
benefits building over time as we continue to build and refine new programs to
better serve the needs of our stakeholders.”
CVS acquired health insurer Aetna, an
expensive bet that combining insurance, prescription drug benefits and CVS’
10,000 drugstores would help the combined company compete in the changing
health-care industry. Investors appear skeptical so far, with the company’s
stock price sliding 20% this year.
The company on Tuesday said
it expects the deal to result in $300 million to $350 million in synergies this
year, and $800 million next year, up from the previously forecast $750 million.
Evercore analysts Ross
Muken and Michael Newshel in a note to clients said “the 2020 color is a net
positive as it sets a floor (which is key!) for allowing investors to gain
confidence in the earnings stream.”
“In addition, investors are
likely to scrutinize the components of the outlook, but it matches our view
(though consensus may come down a touch),” they said.
CVS also announced it
will open 1,500 HealthHUB stores by the end of
2021. These remodeled drugstores focus more on health services and products and
less on candy and greeting cards.
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