Aetna's second-quarter earnings jumped 33 per cent and the health insurer raised its 2015 forecast again after receiving a boost from a government business it plans to feed with a $35 billion acquisition.
Shares of the Hartford, Connecticut-based company started climbing Tuesday before markets opened and after it released results.
Aetna said Thursday that higher underwriting margins or improved profitability helped balance a jump in operating costs. The nation's third-largest health insurer easily topped Wall Street expectations.
The company raised its 2015 forecast for the third time, and now expects full-year operating earnings of at least $7.40 per share. That's up from a range of $7.20 to $7.40 that it predicted this spring.
Analysts expect, on average, earnings of $7.42 per share, according to FactSet.
For the second quarter, Aetna brought in $731.8 million. That compares with $548.8 million last year. Adjusted results in this year's quarter totalled $2.05 per share.
The average estimate of 11 analysts surveyed by Zacks Investment Research was for earnings of $1.84 per share.
Operating revenue climbed 4 per cent to $15.1 billion, which fell short of average analyst expectations for $15.43 billion.
Health insurance is Aetna's main product, but the company also sells dental, group life and disability coverage. The company announced last month that it would buy rival insurer Humana Inc., the nation's second-largest provider of federally funded Medicare Advantage plans. It is part of a buyout flurry in the managed care sector, a major push for growth by the largest companies, which could transform the five biggest health insurers into just three.
The Blue Cross-Blue Shield carrier Anthem Inc. bid $48 billion for Cigna Corp., while Medicaid coverage provider Centene Corp. plans to pay about $6.3 billion for fellow insurer Health Net Inc.
UnitedHealth Group Inc., the nation's biggest health insurer for now, recently nabbed pharmacy benefits manager Catamaran Corp. in a deal valued at more than $12 billion.
Insurers say these acquisitions will help them save money by cutting overlapping back-office costs and quickly improve their technology, which is becoming more important in monitoring patient health and helping customers find care. The tie-ups also are a way to quickly gain customers in certain lines of business like the fast-growing Medicare Advantage market and, in some cases, gain negotiating leverage over care providers, who also have been growing larger.
Shares of Aetna rose about 2 per cent, or $2.21, to $2.21 less than an hour before markets opened Tuesday.
The stock had already climbed 28 per cent since the beginning of the year, while the Standard & Poor's 500 index has increased roughly 2 per cent. Aetna shares have increased 45 per cent in the last 12 months.
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Pricey specialty drugs helped CVS Health cope with tobacco withdrawal to top analyst expectations in the second quarter.
The nation's second-largest drugstore chain said Tuesday that revenue from its biggest business, the pharmacy benefits management segment, jumped 12 per cent to more than $24 billion, spurred in part by specialty drugs.
Specialty drugs are complex medications that treat certain forms of cancer, multiple sclerosis and hepatitis C, among other conditions. They often represent treatment breakthroughs but can cost considerably more than other prescriptions. Use of these drugs is soaring in part due to some newer hepatitis C treatments that could reach millions of patients.
Revenue from the company's retail drugstore segment inched up only 2 per cent to $17.2 billion in part because sales from the front-end of its stores, or the area outside the pharmacy, plunged 7.8 per cent, at established locations.
That's an important indicator of a drugstore chain's financial health because it eliminates the impact of stores that have recently opened or closed.
That front-end figure would have essentially been flat if CVS hadn't decided more than a year ago to pull tobacco products from its store shelves. The drugstore chain's executives knew they would take a sales hit because smokers often grab other products when they stop in for their next pack. But the company dumped tobacco anyway because it is trying to burnish its image as a health care services provider.
CVS Health also booked more than $50 million in costs tied to two sizeable deals it announced during the quarter that ended June 30. The company is spending more than $10 billion to buy pharmaceutical distributor Omnicare and another $1.9 billion to purchase the pharmacy and clinic business of retail giant Target Corp.
Overall, CVS Health earnings climbed 2 per cent to $1.27 billion in the second quarter while revenue rose more than 7 per cent to $37.17 billion. Adjusted earnings came to $1.22 per share.
Analysts expected, on average, earnings of $1.20 per share on $37.16 billion in revenue, according to Zacks Investment Research.
CVS Health also tightened its 2015 earnings forecast to $5.11 to $5.18 per share from a previous range of $5.08 to $5.19.
Analysts expect an average of $5.16 per share, according to FactSet.
CVS Health runs 7,870 drugstores and one of the biggest pharmacy benefits management, or PBM, businesses. PBMs help negotiate the prices that customers pay for prescription drugs and are being relied on more by employers, insurers and other health care bill payers to help control rising drug costs.
Shares of Woonsocket, Rhode Island-based CVS Health dropped 3.4 per cent, or $3.82, to $109 before markets opened Tuesday and after the company detailed results.
The stock has climbed 17 per cent since the beginning of the year, while the Standard & Poor's 500 index has increased nearly 2 per cent. The stock has increased 47 per cent in the last 12 months.
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Elements of this story were generated by Automated Insights
(https://automatedinsights.com/ap) using data from Zacks Investment
Research. Access a Zacks stock report on CVS at
https://www.zacks.com/ap/CVS