CVS CVS Health Corporation

By Lisa Beilfuss 

CVS Health Corp. logged better-than-expected results for its first quarter, as recent acquisitions helped push prescription volumes higher.

The drugstore chain made two acquisitions last year, looking to bring in more patients to counter the effect of falling reimbursement rates. Such rates are under pressure as more drugs are dispensed through the federal Medicare and Medicaid programs, which carry lower margins than private insurers. The company has folded in Omnicare Inc., which dispenses drugs to places like nursing homes, in addition to Target Corp.'s pharmacy business.

In the first quarter, CVS said sales at stores open at least a year rose 4.2%, below the 5.3% clip analysts expected but up from 3.5% in the fourth quarter. The increase came as front-of-store sales -- makeup, food and over-the-counter medicine -- rose 0.7%, a result Chief Executive Larry Merlo said was in-line with expectations. While eroding traffic continues to hurt sales at the front of the store, an extra day from leap year helped offset that impact in the first quarter.

Meanwhile, retail pharmacy sales remained strong, with pharmacy sales and prescription volumes climbing 5.5% and 5.9%, respectively, on a same-store basis. The leap year effect countered the negative impact of recent generic drug introductions, the company said.

Over all, CVS reported a profit of $1.15 billion, or $1.04 a share, down from $1.22 billion, or $1.07 a share, a year earlier. Excluding acquisition-related costs, among other items, per-share profit rose to $1.18 from $1.14.

Revenue rose 19% to $43.22 billion. Analysts projected $1.16 on $43.00 billion in sales.

Still, the company also said it expects a second-quarter adjusted profit of $1.28 to $1.31 a share, below Wall Street's expectations of $1.35. For the year, CVS backed its earnings view, still estimating adjusted earnings of between $5.73 and $5.88 a share.

Shares in the company, up 3.8% since the start of the year, were inactive during premarket trading.

Corrections & Amplifications

CVS's front-of-store sales rose 0.7% in the first quarter. An earlier version of this article said those sales fell by 0.7%.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com

(END) Dow Jones Newswires

May 03, 2016 08:13 ET (12:13 GMT)

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