CVS Health Corp (NYSE: CVS) earnings have nearly doubled in the fourth quarter of 2017, due to a $1.5 billion tax benefit that helped counter a flat performance from its drugstores. The company will use part of its federal tax overhaul benefit to beef up employee compensation and start a new parental leave program. Further, CVS has booked $56 million in financing costs for its planned purchase of the insurer Aetna Inc., which is a $69-billion deal. CVS is not proving an outlook on the earnings-per-share forecast for 2018 because of this pending deal.
CVS in the fourth quarter of FY 17 has reported the adjusted earnings per share of $1.92, beating the analysts’ estimates for the adjusted earnings per share of $1.89 as per the analysts surveyed by FactSet. The company had reported the adjusted revenue growth of 5.3 percent to $48.38 billion in the fourth quarter of FY 17, beating the analysts’ estimates for revenue of $47.54 billion.
Additionally, in the fourth quarter of FY 17, the consolidated operating profit grew 3.6%, to $3.1 billion. The growth was partially due to improvement in gross profit in the Pharmacy Services Segment due to a favorable shift in the timing of Medicare Part D profits between the third and fourth quarters of 2017, when compared to 2016, as well as growth in network and specialty volume, and favorable purchasing economics. In addition, the Retail/LTC Segment gross profit has increased in the fourth quarter, largely due to the improvements in front store margin. The improvements in operating profit were also due to a $50 million decrease in acquisition-related transaction and integration costs as well as a $30 million decrease in store rationalization costs. CVS has raised its starting wage for hourly workers to $11 an hour from $9.
Onn the other hand, these improvements were offset by increases in operating expenses associated with new store openings, and by a $46 million goodwill impairment of the RxCrossroads reporting unit. Moreover, the company will not increase the health insurance premiums for the 2018-2019 plan year, and it will start a paid parental leave program which gives employees with a new baby four weeks off at full pay. Further, several other companies also have announced employee bonuses or other enhanced benefits since Republican lawmakers and President Donald Trump sped at $1.5 trillion tax cut plan into law at the end of last year. Another healthcare competitor, the Blue Cross-Blue Shield insurer Anthem said that it will contribute $1,000 into the 401k retirement accounts of more than 58,000 employees and recent retirees. CVS stock has fallen 3.2% today (as of 11:19AM EST on Feb 8th, 2018; Source: Google Finance) leading to a total decline of over 8.7%.