CVS’ growing drug business makes up for quitting tobacco sales

WOONSOCKET – CVS Health Corp. beat analyst estimates as the company’s prescription drug sales more than made up for the revenue loss the company has suffered after it quit selling tobacco in its retail pharmacies.

Net income fell to $948 million, or 81 cents a share, in the third quarter from $1.25 billion, or $1.02, a year earlier, after the company paid down debt ahead of schedule, the company said in a statement.

CVS stopped selling tobacco products and changed its name to CVS Health in September to focus on the medical side of its operations at 7,700 drugstores. None of its rivals have followed suit in quitting tobacco, a step the company has said will cost about $2 billion a year in revenue.

Sales rose 9.7 percent to $35 billion, beating the $34.7 billion average of analysts’ estimates. Pharmacy services revenue grew 16 percent, to $22.5 billion.

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CVS shares rose 2.7 percent to $88.42 at 7:40 a.m. in New York.

Revenue at the front of the store, where CVS previously sold cigarettes and other tobacco products, fell 4.5 percent, based on same-store sales.

Profit excluding one-time items of $1.15 a share beat by 2 cents average of 20 analysts’ estimates compiled by Bloomberg. The company narrowed its forecast for 2014 adjusted earnings to $4.47 a share to $4.50 a share, from $4.43 to $4.51.

The Patient Protection and Affordable Care Act, which will help provide health insurance coverage to some of the 42 million Americans the U.S. Census says didn’t have coverage through 2013, may benefit CVS. The law will send increased business to the company’s 900 walk-in medical clinics and spur prescription drug sales, which may help make up for the fall-off in tobacco sales.

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