CVS Health posted unexpectedly high earnings in its fourth quarter due to the COVID-19, laying the company’s path to re-enter the Affordable Care Act insurance marketplace next year.
The company’s fiscal fourth quarter ended Dec. 31, 2020, and the company reported that earnings exceed analysts’ expectations. The drugstore chain reported earnings per share of $1.30 adjusted versus the $1.24 that analysts expected. The company’s revenue also exceeds expectations, coming in at $69.55 billion versus the $68.75 billion expected.
The strong earnings numbers reflect the 4% rise in fourth-quarter sales. The sales number was boosted in part by the COVID-19 testing occurring at CVS pharmacies.
Despite the better than expected revenue, the company reported a fiscal fourth-quarter net income of $975 million, or 75 cents per share, which was down from $1.74 billion, or $1.33 per share, the year earlier. The fall in net income is attributed to the higher costs at the company’s health insurance unit.
The company also shared its predictions and fiscal guidance for the upcoming year. Projected earnings per share are expected to range from $6.06 to $6.22, and full-year adjusted earnings per share from $7.39 to $7.55. CVS’s full-year cash flow from operations is projected in the range from $12 billion to $12.5 billion.
The onset of the COVID-19 pandemic has increased the company’s reach. CVS has been a major distributor of vaccines in long-term-care facilities and is expected to play a significant role in the broader rollout of the shots. The company claimed that it has already administered more than 3 million COVID-19 vaccines in over 40,000 long-term-care facilities.
Pharmacies like CVS are the lynchpin in the Biden administration’s plan to vaccinate 300 million Americans by the end of the summer. According to CVS, the company can administer 20 million to 25 million doses per month, depending on access to supply.
“We will use this opportunity to shape a health experience that demonstrates the value we bring. It will create the opportunity to expand our customer base while deepening relationships with current customers,” said CVS Chief Executive Karen Lynch.
COVID-19 testing has also expanded CVS’s reach to consumers by connecting the brand to 8 million new customers. Because the sign-up for testing is done virtually, the company retains customers’ phone numbers and emails, which will continue to help the company expand.
Alongside the earnings report, the company announced the CVS-owned health insurance, Aetna, will re-enter the Affordable Care Act’s individual public exchange, which allows people to buy their own health insurance plans.
CVS acquired Aetna in 2018 and is the country’s largest insurance-pharmacy chain duo.
Like other insurers, Aetna sharply reduced its role in the exchanges brought on by the Affordable Care Act in 2017. Aetna withdrew from additional states in 2018. At the time, the insurer had flagged continuing financial losses and structural issues for its withdrawal.
The decision to sell plans in the Affordable Care Act’s exchanges using the CVS branding is heralded as a sign that those markets have stabilized and are now being seen as a growth opportunity for insurers.
