CVS Health Corp (NYSE: CVS) delivered strong financials in 2020 thanks to its unique position in the market amid the challenging industry environment caused by the coronavirus pandemic.
The company’s 4Q2020 revenue was $69.55 billion, a 4.0% increase from 4Q2019 while its full year revenue amounted to $268.7 billion, a 4.6% increase from the previous year. This revenue increase was supported by strong growth in its retail operations and Health Care Benefits segment. The two growth areas performed better in 2020 than they did in the previous year.
The pandemic’s net positive impact
The coronavirus pandemic had a net positive impact on CVS thanks to its position in the healthcare and pharmaceutical segment. The company reported higher prescription volumes during the year and its investment in COVID-19 testing also paid off. Prescription volumes delivered a 2.0% gain in volumes in 4Q2020 and 3.4% during the full year 2020.
The pandemic’s impact lowered the long-term care prescriptions and new therapy prescriptions. A similar impact was felt in cold and cough product sales. On the other hand, the net positive impact of the pandemic yielded higher generic drug sales in addition to higher pharmacy volumes.
CVS performance outlook
CVS reported a 13.9% decrease in its adjusted operating income in 4Q2020 and a 12.6% decrease for the full year. It attributes the decline to lower customer traffic on account of the sty-at-home and lockdown measures implemented to curb the spread of COVID-19. The vaccine rollouts and improved business environment in 2021 will likely lead to better customer traffic, thus boosting the company’s operating income.
CVS expects its GAAP diluted earnings per share for the full year 2021 to range between $6.06 and $6.22. The adjusted EPS expectation for the year is $7.39 to $7.55 which is within the same ballpark as the $7.50 adjusted EPS that the company achieved in 2020. This expectation is largely because some of CVS segments that had been severely hit by the pandemic are expected to recover in 2021 while revenues from activities such as COVID-19 testing will reduce.