Rush to fill medicine cabinets ahead of outbreak fuels CVS

A rush to fill medicine cabinets and pantries ahead of the rapidly spreading COVID-19 pandemic helped fuel a surging first-quarter profit for CVS Health.

The outbreak also lifted the health care giant’s insurance business because patients delayed or cancelled some surgeries and used the system less.

But company leaders warned analysts on Wednesday that the pandemic’s impact will grow complex as the year evolves. Their stores saw a big drop in business after the quarter ended, as people stayed home while governments issued shelter in place orders.

Patients also stayed out of doctor offices, and that meant the company had fewer new prescriptions to fill. Those numbers will improve as shelter in place orders ease and company stores return to normal hours.

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But soaring unemployment rates could hurt the company’s insurance business as people lose health coverage with their jobs. And delayed surgeries or procedures that the insurer didn’t have to cover in the first quarter will probably be rescheduled later this year.

“The quarterly cadence of earnings is likely to vary from historical patterns,” Chief Financial Officer Eva Boratto said.

CVS Health operates one of the nation’s largest drugstore chains with about 9,900 retail locations. It also runs prescription drug plans for big clients like insurers and employers through a large pharmacy benefit management business, and the company sells health insurance through its Aetna arm.

In the first quarter, net income jumped 41% to a little more than $2 billion compared to last year, when the company booked a big charge tied to some store closings.

Earnings excluding one-time items totaled $1.91 per share in the most recent quarter, easily beating Wall Street per-share projections of $1.63, according to Zacks Investment Research.

Revenue climbed 8% to $66.76 billion, also topping analyst estimates of $63.13 billion.

Total revenue from the company’s biggest business, its pharmacy benefit management arm, climbed 4% to nearly $35 billion. CVS Health sold more specialty drugs and 90-day prescriptions. Early refills of some medications also rose as people got ready for the pandemic.

The health crisis has forced patients around the country to largely hunker down in their homes and cut down on things like routine trips to the drugstore.

CVS Health Corp. said sales soared for a prescription home delivery business it has been building, and the company saw a spike in the use of telemedicine visits through its clinics.

CVS also booked an unusually high 8% rise in sales from the front end — or the area outside the pharmacy — of established drugstores as customers stocked up on health products and other merchandise.

The Woonsocket, Rhode Island, company reaffirmed its annual forecast on Wednesday. It expects full-year adjusted earnings to range between $7.04 to $7.17 per share.

Analysts forecast, on average, earnings of $7.02 per share, according to FactSet.

Company shares climbed more than 2% to $62.77 in late-morning trading while broader indexes rose less than 1%.

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Follow Tom Murphy on Twitter: @thpmurphy

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