CVS Health meets 4Q profit expectations, tops revenue forecasts, as specialty drug sales rise

CVS Health's fourth-quarter earnings climbed more than 4 percent in a performance that matched Wall Street expectations even though the pharmacy chain's decision to quit tobacco sales hurt business at its drugstores.

Company shares started climbing Tuesday before markets opened and after CVS Health released results.

The Woonsocket, Rhode Island, company said it earned $1.32 billion, or $1.14 per share, in the three months that ended Dec. 31. That compares with earnings of $1.27 billion, or $1.05 per share, in the previous year's quarter. Revenue climbed 13 percent to $37.06 billion.

Adjusted results, which exclude amortization costs tied to acquisitions, totaled $1.21 per share.

Analysts also forecast about $36.07 billion in revenue, according to Zacks Investment Research.

CVS Health runs the nation's second-largest chain of drugstores with 7,800 locations and one of the biggest pharmacy benefits management, or PBM, operations. The company absorbed a drop of more than 7 percent drop in revenue from the front end of its established drugstores, or the area outside the pharmacy.

CVS Health drew national attention a year ago when it promised to phase out sales of tobacco products from its stores as company leaders declared that tobacco has no place in a health care setting. The company's stores kicked those sales by late September, when the corporate name changed to CVS Health from CVS Caremark.

The move drew praise from President Barack Obama, an ex-smoker, and it earned CEO Larry Merlo an invitation to watch the president's State of the Union address with first lady Michelle Obama. But CVS Health said it expected the decision to hurt sales.

An increase in specialty pharmacy business helped counter that hit. CVS Health said revenue from the pharmacy benefits management, or PBM, side of its business climbed nearly 22 percent to $23.9 billion in the quarter.

The company operates one of the largest PBMs in the country. That business runs prescription drug plans for employers, insurers and other customers

Specialty drugs are expensive, usually injected, drugs for complex and chronic health conditions — a category that is driving overall spending on medications.

CVS Health also reaffirmed on Tuesday a forecast it made in December for 2015 adjusted earnings ranging between $5.05 and $5.19 per share.

Analysts expect, on average, earnings of $5.15 per share, according to the data firm FactSet.

Company shares climbed more than 3 percent, or $3.19, to $102.75 Tuesday in pre-market trading.

The stock advanced 34 percent last year, tripling the gain of the broader Standard & Poor's 500 index. The shares have had more measured growth so far this year, climbing 3.4 percent as of Monday's close while the S&P 500 has slumped.