CVS Health raises annual profit view after better-than-expected first quarter

© Reuters. CVS Health logo is seen displayed in this illustration taken, May 3, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

By Mrinalika Roy

(Reuters) -CVS Health Corp beat estimates for first-quarter results on Wednesday, helped by strong performance in its retail store operations and insurance unit, encouraging the company to raise annual adjusted profit forecast.

Pharmacy chains like CVS have benefited from distribution of COVID-19 vaccines and tests during the pandemic. However, in February, the company said it expected a big decline in COVID-19 vaccination and testing administered at its stores this year.

The company administered over eight million COVID-19 vaccines at its stores in the quarter, and now expects to administer 18 million vaccines in total in 2022. This is in stark contrast to over 20 million vaccines it administered in the preceding quarter.

COVID-related contribution to retail business is expected to fall 60%-65% this year, Chief Financial Officer Shawn Guertin said during a post-earnings call.

The company also administered fewer COVID tests at its stores than the preceding quarter but said demand for over-the-counter COVID-19 tests was higher which added to its retail segment growth.

Retail segment performance was also driven by inflation of branded drugs and higher prescription volumes.

Same-store sales rose 10.7% in the quarter, as easing coronavirus curbs boosted footfalls.

Falling demand for COVID-19 related products was also offset by membership growth in its healthcare benefits segment, which offers various insurance products and services. The segment saw a 12.8% rise in revenue in the quarter and the company now expects membership increases between 24 million and 24.3 million for the full year.

Morningstar analyst Julie Utterback said CVS turned in a 'stellar' quarterly performance which allowed management to slightly increase its bottom-line outlook for the full year.

On an adjusted basis, CVS earned $2.22 per share, compared with estimates of $2.15.

The company now expects 2022 full-year adjusted profit to be between $8.20 and $8.40 per share, higher than its prior guidance of $8.10 and $8.30 per share.