CVS reported a quarterly loss of more than $3 billion to cover its share of a global opioid settlement, but its third-quarter earnings blew past Wall Street estimates.
The pharmacy retail giant said that it had a $5.2 billion charge in the third quarter for a settlement relating to its role in the opioid crisis. The settlement resolves "substantially all opioid lawsuits and claims filed by other states, political subdivisions and tribes against the company to be paid over 10 years, beginning in 2023," according to CVS' earnings report (PDF).
The company swung to a loss of $3.4 billion, or $2.60 a share, for the third quarter, after income of $1.6 billion, or $1.20 a share, in the same quarter a year ago. Adjusted for the settlement, the drugstore chain's EPS is $2.09, above the $1.99 per share expected by Wall Street analysts.
It's the third consecutive quarter that CVS beat earnings expectations. Third-quarter revenue increased to $81.2 billion, up 10.7% compared to $73.8 billion at the same time a year ago.
"We delivered another outstanding quarter, and have raised full-year guidance as a result. We continue to execute on our strategy with a focus on expanding capabilities in healthcare delivery, and the announced acquisition of Signify Health will further strengthen our engagement with consumers," CVS Health CEO Karen Lynch said in a statement.
CVS' Health Care Benefits segment grew nearly 10% compared to the same period a year ago. Medical membership reached 24.3 million, an increase of 590,000 members compared with a year ago, reflecting increases in Medicare and Commercial membership, partially offset by a decline in Medicaid membership. The decline in Medicaid membership reflects the expected loss of a large customer during the three months ending September 30, the company said.
Pharmacy services revenue also rose by 10% compared to a year ago driven by increased pharmacy claims volume, growth in specialty pharmacy and brand inflation, partially offset by continued client price improvements.
The company's retail and long-term care segment saw revenue increase nearly 7%, primarily driven by increased prescription and front store volume including the sale of COVID-19 over-the-counter test kits, as well as pharmacy drug mix and brand inflation. But profits in that segment dropped with lower demand for COVID-19 diagnostic testing and vaccinations.
CVS raised its full-year guidance and now expects adjusted earnings per share for the full year of between $8.55 and $8.65, up from the range of $8.40 to $8.60 that it previously announced.
In early September, CVS announced it planned to buy Signify Health for approximately $8 billion. The deal is expected to close in the first half of 2023.
In a filing with the Securities and Exchange Commission in October, CVS Health said the Department of Justice (DOJ) sent the companies a second request for information on the merger on Oct. 19. The second request allows the agency 30 extra days to probe the merger