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CVS stock rises on Q2 earnings, guidance

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Yahoo Finance Live anchors discuss second-quarter earnings for CVS Health.

Video Transcript

JULIE HYMAN: Let's look at CVS here because that's another company that came out with its numbers. Pretty solid numbers from CVS. Got to say the shares are up almost 3%. The company beat estimates. Second quarter revenue was up 11%, earnings per share beating. The company said demand for over-the-counter COVID tests was pretty strong. It raised its outlook for the year.

And remember, CVS now has a lot of different business lines. It has its retail pharmacy business. It has this pharmacy benefit management business. It has its insurance business. On the insurance front, the insurance medical benefit ratio-- remember, that's the amount of premiums that it pays out in cost-- it actually fell, which is a good sign. That means they are paying-- spending less of their premiums to pay for medical care. 82.9% was that number.

BRIAN SOZZI: I'm losing all my mojo because this was a little bit of a snoozy quarter from CVS. And that's not-- look, if you're a CVS shareholder, that's not a bad thing. By and large, true point. This was--

JULIE HYMAN: You like spectacular--

BRIAN SOZZI: I do. I like big misses and big booms. There's nothing in between. But look, the CVS quarter was very good, especially in the context of retailers falling off the map. Warnings from Walmart, Target-- you name it. CVS stores, of course, CVS shops are the main pharmacy inside Target stores. Nonetheless, the retail business, sales up 6.3%. Probably not as exposed to discretionary categories as other retailers. You walk into a CVS, a lot of items that you need today regardless, a lot of daily necessities.

BRAD SMITH: Yeah, total revenues up 11% compared to the prior year. And then you think about the full year guidance as well. They raised their GAAP EPS range, brought that up about 50, 40--

JULIE HYMAN: $0.50?

BRAD SMITH: $0.40, $0.50, it looks like. But then at the end of the day, it does also come back to, for all of these different categories, too, where they're continuing to spend into those categories to see growth. Of course, on the retail side of the business, that's going to continue to navigate its own supply chain issues.

However, on the other side, where you've got the PBM business, where there are really only three major players in the PBM business in the United States, it is CVS, it is Walgreens, it is Express Scripts. And for all of these major players, how much they can continue to bring even more of the services that they offer in-house. That's why we saw that wave of acquisitions and the deal making take place in 2017, 2018, to really combine PBMs with the insurance operations as well.

And then even more of the ability to service individuals with patient care on-site, albeit maybe a slimmer or slimmed down type of patient care, but that's where you get people in the door. And that's where you create even more of those engagements over time.

JULIE HYMAN: PBMs have always been a mystifying business to me.

BRAD SMITH: It is.

JULIE HYMAN: I have to be honest.

BRIAN SOZZI: Just pure moneymakers.

JULIE HYMAN: Why it even exists.

BRAD SMITH: Chargebacks, yeah.

JULIE HYMAN: But that's a conversation for another day.