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CVS beats Q2 expectations as pharmacy sales rebound

An increase in sales at CVS Health Corp.'s pharmacy business helped push the retailer's overall fiscal second-quarter revenue and profit higher in its earnings report Aug. 8, providing some relief for investors worried about client losses in recent quarters.

Revenue for the three months ended June 30 totaled $45.69 billion, above the mean consensus estimate of $45.36 billion compiled by S&P Capital IQ and about 4.5% higher than the $43.73 billion the company reported for the year-ago quarter. Within CVS' pharmacy services segment, sales rose 9.5% to $32.3 billion.

Net income attributable to CVS Health was $1.1 billion, an increase of 18.8% over the $924 million in net profit that the chain reported for the same quarter in 2016, but slightly below the mean consensus estimate of $1.19 billion, according to S&P Capital IQ.

The Woonsocket, R.I.-based company reported GAAP earnings per diluted share of $1.07, lower than the mean consensus estimate of $1.17 compiled by S&P Capital IQ. CVS said its GAAP EPS included a $135 million goodwill impairment charge related to its RxCrossroads segment,

The company beat estimates on adjusted EPS, which it reported as $1.33, higher than the consensus normalized EPS estimate of $1.31, according to S&P Capital IQ.

For its full fiscal 2017 guidance, CVS narrowed and revised its GAAP diluted EPS, which includes the impairment charge. The company said it now expects full-year GAAP diluted EPS of $4.92 to $5.02. Previously, company executives had projected an EPS range of $5.02 to $5.18.

Adjusted EPS for the full fiscal year was also narrowed to $5.83 and $5.93, from a previous projection of $5.77 to $5.93.

"While we are pleased to report results consistent with our expectations, we won’t be satisfied until the total enterprise returns to healthy levels of earnings growth," CVS President and CEO Larry Merlo said in a news release announcing the company's results.

The RxCrossroads charge also affected operating profit, which was $2.12 billion for the quarter, about 10.2% lower than the $2.36 billion CVS reported for second quarter 2016.

The bump in sales at CVS' core pharmacy business comes after losses in recent quarters. The company's annual prescription count took a hit at the end of 2016 when it lost about 40 million prescriptions as healthcare management firms Tricare and Prime Therapeutics signed contracts with rival Walgreens Boots Alliance Inc.

Since then, CVS executives have cautioned investors that the retail pharmacy's profit would take a hit in 2017. During a May 2 presentation to analysts, CFO David Denton said 2017 would be a "rebuilding year" for CVS.

Shares of the retail pharmacy fell 0.2% to $78.95 in premarket trading on the New York Stock Exchange.