- CVS reported mixed results for the fourth quarter on Wednesday, but its dismal outlook for 2019 stung for some investors, with Evercore ISI analysts calling the forecast a "major disappointment." Shares fell about 7% in late morning trading.
- CVS, in its first results encompassing its buy of Aetna, cited headwinds in 2019 having a "disproportionate impact" on the year, including issues with its long-term care business, which includes Omnicare, a unit that provides prescriptions to nursing homes. The company reported a $2.2 billion goodwill impairment charge related to this unit in 2018.
- CVS CEO Larry Merlo said one of the most significant issues facing the company is the ongoing pharmacy reimbursement pressures and the reduction in any offsets to those pressures.
The mixed results and weak 2019 outlook come as CVS continues to integrate Aetna into its business after purchasing the insurer. "We view 2019 as a bridge to the future," Merlo told investors Wednesday.
CVS said it expects to generate operating income between $11.7 billion to $12.1 billion for the year and earnings per share to be between $6.68 to $6.88. Analysts had expected $7.35.
Issues such as reimbursement pressures, lingering questions around rebates and continued government scrutiny will affect 2019 performance. Lower occupancy rates at nursing facilities its long-term care business serves and the deteriorating financial health of those occupants are also headwinds for 2019.
"We think that it may take some time, perhaps beyond 2019, to fully fix these issues because PBM contracts take time to renew or renegotiate, store concepts need to be tested and rolled out, and reimbursement issues are continuing, in our observation," Analysts for Edward Jones said in a note.
Revenue for the fourth quarter did increase 12.5% compared to the prior year period, but the company reported a $419 million net loss for the current quarter.
Revenue for full-year 2018 increased 5.3% compared to 2017, but the company did report a $594 million net loss.
Although CVS has completed its acquisition of Aetna, the D.C. District Court has yet to give its final blessing. Just last week, the DOJ said its settlement agreement with the company would remain the same despite negative comments received from the public, part of the final approval process before Judge Richard Leon.