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CVS Tumbles After Fresh $2.2 Billion Hit to Long-Term Care Business

Investing.com - Shares in CVS (NYSE:CVS) tumbled Wednesday after the company was forced to take another $2.2 billion charge against its struggling long-term care business, built around its 2015 acquisition of Omnicare.

The charge follows a $3.9 billion hit for the same business line only six months ago. It overshadowed a set of results that were otherwise largely in line with expectations, but also hinted at a challenging year as it digests the $70 billion acquisition of Aetna (NYSE:AET).

The shares fell 5.1% to $66.30 in premarket trading in response.

"The LTC business has continued to experience industry-wide challenges that have impacted our ability to grow the business at the rate that was originally estimated when the Company acquired Omnicare," CVS said in a statement.

It said it had decided to write off more goodwill after "LTC management submitted an updated final budget for 2019 which showed significant additional deterioration in the reporting unit’s projected financial results for 2019."

The company forecast that adjusted earnings per share will fall this year to a range of $6.68 to $6.88, from $7.08 in 2018, due in part to a higher debt burden after the Aetna acquisition. It expects operating cash flow of between $9.8 billion and $10.3 billion, up from $8.9 billion in 2018.

"2019 will be a year of transition as we integrate Aetna and focus on key pillars of our growth strategy," chief executive Larry Merlo said in a statement.

"We are fully aware of the need to address the impact of certain headwinds that are having a disproportionate impact in 2019 compared to prior years, and importantly, we are taking comprehensive actions to move past them," he added in a nod to the LTC unit's troubles.

The firm reported earnings per share of $2.14 on revenue of $54.42B. Analysts polled by Investing.com forecast EPS of $2.09 on revenue of $54.61B. That compared to EPS of $1.92 on revenue of $48.39B in the same period a year earlier. The company had reported EPS of $1.73 on revenue of $47.27B in the previous quarter.


CVS Health Corp follows other major Healthcare sector earnings this month


On January 22, J&J reported fourth quarter EPS of $1.97 on revenue of $20.39B, compared to forecasts of EPS of $1.95 on revenue of $20.2B.

Pfizer earnings beat analyst's expectations on January 29, with fourth quarter EPS of $0.64 on revenue of $13.98B. Investing.com analysts expected EPS of $0.63 on revenue of $13.9B

Stay up-to-date on all of the upcoming earnings reports by visiting Investing.com's earnings calendar

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