CVS profits higher for 2020, despite 4Q drop

Contributed photo A CVS employee administers a COVID-19 vaccine at a long-term care facility.

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By Matt Pilon

The COVID-19 pandemic was a drag on Aetna parent CVS Health Corp.’s fourth-quarter profits, but overall helped the Rhode Island-based pharmacy giant boost its bottom line for the full year.

CVS on Tuesday reported profits of $973 million, or 74 cents per diluted share, for the three months ended Dec. 31, 2020, down from $1.75 billion, or $1.33 per share, in the final quarter of 2019.

Fourth-quarter revenue was up 4% year over year, reaching $69.55 billion.

The profits and revenue both beat analyst forecasts compiled by Zacks Investment Research.

The company said the 44% drop in its profits for the quarter was the result of pandemic-related investments, testing and treatment costs, the divestiture of Aetna’s standalone Medicare Part D prescription drug plans and worker’s compensation business, and a $674 million loss on the early extinguishment of debt.

CVS has now administered more than 15 million COVID-19 tests at more than 4,800 pharmacy locations and more than 3 million COVID-19 vaccines at long-term care facilities across the country.

While the pandemic hurt CVS’ fourth-quarter earnings, it led to lower volumes of discretionary medical procedures and healthcare utilization, which reduced CVS’ benefit costs for the year.

That contributed to an 8.1% increase in 2020 profits, which grew from $6.63 billion, or $5.08 cents per diluted share, to $7.18 billion, or $5.46 per share.

The pandemic also took a bite out of merchandise sales at CVS pharmacies, or “front store” sales, during the fourth quarter, with revenue falling 1.6% due to lower foot traffic and reduced sales of cough and cold products. However, front store sales were up by 1.2% for the full year compared to 2019.

“The COVID-19 pandemic presented unique challenges to our business and to the entire healthcare industry,” CVS President and CEO Karen S. Lynch, the Aetna president who was promoted to the CVS’ top job during the fourth quarter, said in a statement. “We utilized the full depth and breadth of our capabilities and our presence in local communities across the country, to play a leadership role in COVID-19 testing and vaccine administration. Our ability to deliver 2020 full-year results above expectations is a testament to the strength of our strategy and the flexibility of our diversified health services model.”

For 2021, CVS forecasts earnings ranging from $6.06 to $6.22 per share.