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How Did CVS Stack Up Against Walgreens Boots Alliance's Results?

How Did CVS Stack Up Against Walgreens Boots Alliance's Results?
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Shares of pharmacy benefit managerCVS Health Corp (NYSE: CVS) are slumping in reaction to a Q3 revenue miss and negative guidance issued by the company.

Q3: CVS Vs. Walgreens

CVS reported third-quarter earnings per share of $1.64, ahead of the $1.57 consensus estimate. Revenues came in at $44.6 billion, shy of the average analysts' estimate of $4.58 billion.

In comparison, Walgreens Boots Alliance Inc (NASDAQ: WBA) reported fourth-quarter adjusted earnings per share of $1.07 per share on October 20, while analysts, on average, had been expecting earnings per share of $0.99. Sales of $2.68 million came in below the consensus estimate of $29.1 billion.

Walgreens Boots Alliance has negotiated a deal to acquire Rite Aid Corporation (NYSE: RAD) for $17.2 billion or $9 per share. Recently, the companies announced they are pushing back the date of merger to January 27, 2017, amid divestment plans to secure anti-trust approval.

Guidance Downs CVS Amid Competitive Pressure

Adding to the worries arising out of the revenue miss, CVS lowered its full-year 2016 earnings per share guidance to $5.77–$5.81 from $5.81–$5.89 previously. The 2017 earnings per share guidance of $5.77–$5.83 also trailed the consensus estimate of $6.53.

However, rival Walgreens Boots Alliance expects 2017 earnings per share of $4.85 to $5.20, in line with the consensus estimate of $5.03.

Following its results announcement, the company's shares rose 1.04 percent to $87.30, but have since then lost 3.5 percent from the pre-earnings session.

As though compensating for the financial performance and outlook, CVS announced a $15 billion stock buyback program.

Is The Business Model Not Working?

Apparently, the company's strategy of an integrated business model hasn't cut much ice with customers. Apart from functioning as a pharmacy benefit manager, the company also operates a chain of retail store pharmacies.

Among the many reasons offered for the lackluster showing were market-wide slowdown in prescription growth, a change in the pharmacy network that led to some retail prescriptions moving out of its network and a clamp down on drug price fixing by generic companies.

In pre-market trading, shares of Walgreens Boots Alliance pulled back 4.24 percent to $78 and those of CVS is slumping 15.67 percent to $70.32.

At last check in late morning, Walgreens was down 2.21 percent at $79.65, and CVS was down 12.56 percent at $72.89.

Image Credit: By Otisfrog (Own work) [CC BY-SA 3.0], via Wikimedia Commons

Posted-In: Earnings News Guidance Health Care Technicals Movers Trading Ideas General Best of Benzinga


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