CVS Health tanks as it downgrades full-year outlook

Shares in CVS Health Corp tanked on Tuesday after the pharmacy chain downgraded its outlook for the full year amid slowing prescription growth and on the back of recent pharmacy network changes.

CVS said it now expects full-year 2016 earnings per share of between $5.77 and $5.83, down from a previous range of $5.81 and $5.89. For next year, it forecasts adjusted EPS of $5.77 to $5.93.

For the three months to the end of September, net income attributable to shareholders rose to $1.54bn, or $1.43 a share from $1.25bn, or $1.11 per share in the same period a year ago.

Meanwhile, net revenues were up 15.5% to $44.6bn, with revenues in the pharmacy services segment up 19.2% to $30.4bn and revenues in the retail/long-term care segment up 12.5% to $20.1bn.

President and chief executive officer Larry Merlo said: “We posted a solid third quarter with the pharmacy benefits management exceeding our expectations and retail performing at the lower end of our expectations.

“However, very recent pharmacy network changes in the marketplace are expected to cause some retail prescriptions to begin migrating out of our pharmacies this quarter. In addition, we are currently experiencing slowing prescription growth in the overall market as well as a soft seasonal business. These factors combined are leading us to reduce the mid-point of our guidance for this year by five cents per share. The network changes have more significant implications for our 2017 outlook. While we expect a healthy increase in PBM operating profit growth in 2017, we expect a decrease in retail operating profit growth.”

At 1300 GMT, CVS shares were down 15% to $71.19 in pre-market trade.