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CVS Stock Slides As COVID Cost Concerns Cloud Earnings Beat, Guidance Boost

New CEO Karen Lynch said the quarter was highlighted by "broad sales and earnings outperformance, as well as sequential operating margin improvement."

CVS Health Corp.  (CVS) - Get CVS Health Corporation Report posted stronger-than-expected second quarter earnings Wednesday, and lifted its full year profit guidance, thanks in part to a solid rebound in retail and pharmacy sales.

The stock traded lower, however, after the retailer said it would raise its minimum wage to $15 per hour in 2022 and noted COVID-related costs would rise over the final half of this year.

CVS said adjusted earnings for the three months ending in March were pegged at $2.42 per share, down 8.3% from the same period last year but well ahead of the Street consensus forecast of $2.06 per share. Group revenues, CVS said, rose 11.1% from last year to $72.6 billion, again topping analysts' estimates of a $70.3 billion tally.

Looking into the 2021 financial year, CVS lifted its forecast for adjusted earnings, which it now sees in the region of $7.70 to $7.80 per share, from its prior forecast of $7.56 to $7.68 per share.

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"We delivered another quarter of strong results and once again raised our outlook for the year," said CEO Karen Lynch. "This quarter was highlighted by broad sales and earnings outperformance, as well as sequential operating margin improvement."

"We continue to play a critical role in helping America prevail against the pandemic while demonstrating the effectiveness of our unique business model, which is focused on meeting customer needs through innovations that make health care more local, affordable and connected," she added.  

CVS shares were marked 3.23% lower in early trading immediately following the earnings release to change hands at $81.41 each.

Pharmacy Services revenues rose 9.7% to $38.3 billion, CVS said, Retail sales rose 14.3% to $24.73 billion, "driven by increased prescription volume, COVID-19 vaccinations and diagnostic testing and higher front store revenues across all product categories.

The group's healthcare benefits division saw sales rise 11.1% to $20.5 billion as it added Aetna's operations to its legacy business.