CVS Health maintains 2020 profit forecast despite coronavirus hit

By Manas Mishra and Trisha Roy

(Reuters) - CVS Health Corp on Wednesday said it was sticking to its 2020 forecast and expected a strong second quarter, as reduced medical service use for its Aetna insurance business offset coronavirus-related expenses and the pandemic's impact on pharmacy sales and prescriptions.

The company, which has a health insurance business, a large pharmacy benefit manager and retail pharmacy stores, said it still expects 2020 adjusted profit of $7.04 to $7.17 per share, and its shares rose 2.3% to $62.62.

"Sticking with the guidance should be enough for the stock at a time when the company is also dedicating extra resources to manage the COVID-19 pandemic," said Bank of America analyst Michael Cherny.

CVS said sales of over-the-counter health products fell 11% in April, as Americans largely stayed home to help slow the spread of the coronavirus and COVID-19, the sometimes deadly illness it causes.

The company said its second-quarter results would reflect a "significant increase" in pandemic-related expenses, such as bonus payouts to some employees and waiving fees associated with home delivery.

The stockpiling of healthcare items, disinfectants and other necessities by consumers that fueled a surge in retail sales and led to a better-than-expected first quarter was not sustained in April, when many states required residents to stay at home. Rival Walgreens Boots Alliance reported a similar trend when it announced quarterly results last month.

"We are seeing that as shelter-in orders are lifting, and we return our hours of operation to normal hours, we're beginning to see sales improve," said Chief Operating Officer Jonathan Roberts.

The company was seeing some benefit from its prescription home delivery initiatives, and highlighted efforts to expand COVID-19 testing. The company expects to have up to 1,000 locations across the country offering self-swab coronavirus tests.

"I will say that the nature of our business is, to a degree, recession resistant," Chief Executive Larry Merlo said on a conference call.

Sales at CVS' retail unit jumped 7.7% to $22.75 billion in the first quarter, helped by strength in its pharmacy and over-the-counter consumer health products.

Aetna fared well in the first quarter as it spent less on medical claims, with patients staying away from doctors' offices and hospitals over coronavirus fears and elective procedures were delayed or canceled to preserve capacity for COVID-19 patients.

That trend continued in April, with a 30% decline in use of medical services overall and 50% drop in laboratory and radiology services.

The company's large pharmacy benefits business also benefited from consumer stockpiling of medicines in the first quarter, but the company said that trend had since reversed. Sales rose 4.2% to $34.98 billion.

CVS said it had an adjusted first-quarter profit of $1.91 per share, topping analysts' average expectations by 28 cents, according to Refinitiv IBES data.

Overall sales rose 8.3% to $66.76 billion, beating estimates by $2.66 billion.

(Reporting by Manas Mishra and Trisha Roy in Bengaluru and Caroline Humer in New York; Editing by Shounak Dasgupta and Bill Berkrot)