Summary
CVS Health Corporation reported solid top-line growth in the first quarter of 2016, with net revenues increasing by 18.9% year-over-year to $43.2 billion. This growth was primarily driven by the inclusion of Omnicare and Target pharmacies, as well as increased prescription volume in both the Pharmacy Services and Retail/LTC segments. Despite revenue growth, net income attributable to CVS Health decreased by 6.1% to $1.15 billion ($1.04 per diluted share) from $1.22 billion ($1.07 per diluted share) in the prior year's first quarter. The company's strategic acquisitions are contributing to revenue expansion, but they also led to higher interest expenses due to increased debt. While gross profit dollars increased, the gross profit margin saw a slight decline due to a shift in business mix towards the lower-margin Pharmacy Services segment and ongoing pricing pressures. CVS Health continues its robust share repurchase program, spending approximately $2.1 billion in the quarter, underscoring a commitment to returning capital to shareholders.
Financial Highlights
53 data points| Revenue | $43.22B |
| Cost of Revenue | $36.47B |
| Gross Profit | $6.74B |
| Operating Expenses | $4.56B |
| Operating Income | $2.19B |
| Interest Expense | $288.00M |
| Net Income | $1.15B |
| EPS (Basic) | $1.04 |
| EPS (Diluted) | $1.04 |
| Shares Outstanding (Basic) | 1.09B |
| Shares Outstanding (Diluted) | 1.10B |
Key Highlights
- 1Net revenues increased by 18.9% to $43.2 billion, largely due to acquisitions (Omnicare and Target pharmacies) and growth in both operating segments.
- 2Net income attributable to CVS Health decreased by 6.1% to $1.15 billion, or $1.04 per diluted share, compared to $1.22 billion, or $1.07 per diluted share, in Q1 2015.
- 3Gross profit increased in dollar terms by 9.4% to $6.7 billion, but the gross profit margin decreased from 16.9% to 15.6% due to business mix shift and pricing pressures.
- 4Operating expenses increased by 13.3% primarily due to the integration of acquired businesses and higher store operating costs.
- 5Interest expense, net, more than doubled to $283 million from $134 million, driven by debt incurred for acquisitions.
- 6The company repurchased approximately $2.1 billion of its common stock during the quarter under its share repurchase program.
- 7The Pharmacy Services segment saw revenue growth of 20.5% while the Retail/LTC segment grew by 18.6%, with both segments experiencing increased prescription volumes and generic dispensing rates but facing pricing/reimbursement pressures.