CVS Health (CVS) gave a 2019 adjusted earnings forecast that’s substantially below Wall Street’s expectations, following the drugstore and pharmacy-benefits management company’s about $68 billion takeover of insurer Aetna late last year. CVS stock tumbled early Wednesday.
Adjusted earnings for 2019 will be $6.68 to $6.88 a share, the medical services giant said. Wall Street expected CVS earnings of $7.36.
CVS Health is trying to set low expectations after the Aetna deal’s November closure. CEO Larry Merlo called 2019 a “year of transition” in a statement and said CVS would need to “address the impact of certain headwinds that are having a disproportionate impact in 2019 compared to prior years.”
Another deal is dragging down CVS: its 2015 takeover of nursing-home drug provider OmniCare. Nursing homes are seeing fewer customers and aren’t as profitable. CVS is taking a $2.2 billion charge on the deal after those trends “have impacted our ability to grow the business at the rate that was originally estimated.” The charge follows a $3.9 billion writedown in the second quarter.
CVS is also struggling on costs. While it got a lower tax rate thanks to federal tax changes, the company has had to put some of those savings back into wages and benefits for workers.
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