CVS Health tops forecasts, reserves billions for settlement

CVS in Wadsworth Plaza in Philadelphia, Wednesday, Sept. 29, 2021. CVS Health reports quarterly financial results Wednesday, Nov. 2, 2022. (AP Photo/Matt Rourke, File)

CVS Health booked a third-quarter loss of more than $3 billion after setting aside money for a potential opioid litigation deal but still beat expectations and raised its 2022 forecast.

The health care giant detailed on Wednesday a planned nationwide settlement of lawsuits over how it has handled prescriptions for powerful painkillers linked to an overdose epidemic.

The company recorded in the recently completed quarter a $5.2 billion pretax charge for the settlement. That covers payments over 10 years, starting next year.

CVS CEO Karen Lynch told analysts Wednesday morning that the company has a “high degree of confidence” that states will accept the deal. She noted that state attorneys general were at the negotiating table when CVS Health began discussions late last month.

Mizuho Securities USA analyst Ann Hynes said in a note that the payments should be manageable for the company and won't hurt CVS Health's growth. She also noted that the deal removes a big uncertainty hanging over the stock.

CVS Health also recorded a $2.5 billion loss in the quarter on assets held for sale to write down the company’s struggling Omnicare long-term care business. Lynch told analysts the company was “actively exploring strategic alternatives” for the business.

CVS Health also saw sales growth in the quarter from all three of its main businesses as total revenue climbed 10% to $81.2 billion.

Adjusted earnings, which don't count one-time items like the settlement, totaled $2.09 per share.

Analysts expected, on average, adjusted earnings of $2 per share on $76.74 billion in revenue, according to FactSet.

CVS operates one of the nation’s largest drugstore chains with nearly 10,000 retail locations. It runs prescription drug plans for big clients like insurers and employers through a large pharmacy benefit management business.

It also provides health insurance for more than 24 million people through its Aetna arm.

Prescription growth fueled an 11% jump in revenue from the company's largest segment, the pharmacy benefit management business.

The ongoing COVID-19 pandemic also continues to help sales. Company leaders said they expect more than $3 billion in revenue this year from vaccinations, diagnostic testing for the virus and test kits sold over the counter or without a prescription. But Chief Financial Officer Shawn Guertin cautioned against expecting a similar level of sales going forward.

CVS Health now expects adjusted earnings of $8.55 to $8.65 per share for this year, a higher and narrower forecast than it made in August.

FactSet says analysts predict, on average, earnings of $8.55 per share.

Guertin said CVS Health's initial goal for 2023 is to grow adjusted earnings to a range of $8.70 to $8.90 per share. The company will provide a detailed forecast early next year.

Analysts are looking for $9.07 per share next year.

Shares of CVS Health Corp., based in Woonsocket, Rhode Island, climbed 5%, or $4.63, to $99.25 Wednesday afternoon while broader indexes slipped.

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Follow Tom Murphy on Twitter: @thpmurphy