$CVS - CVS reports earnings Wednesday. Here’s what to expect

CVS has had to weather some rocky stock moves since closing on its merger with health insurer Aetna Inc., but things could be looking up soon.

Shares of the drugstore chain CVS, +0.58%  have fallen 15% so far this year amid narrowing pharmacy margins; investor concern over the future of health policy; increased scrutiny into the pharmacy-benefit manager model (CVS owns its own PBM, CVS Caremark); and investor skepticism over the company’s $70-million Aetna acquisition.

Some of those concerns seem to be easing. After attending the company’s Investor Day in June, Raymond James analysts wrote in a note that the company was now “well-positioned to increase market share and offer new, innovative products to drive growth.”

Cantor Fitzgerald analyst Steven Halper wrote in a June note: “We maintain our view that, although 2019 may be a transitional year, CVS is nicely positioned to transform health-care delivery.”

Part of CVS’s plan to transform the health-care industry involves a bigger push into health services. The company is rolling out specialized “HealthHUB” stores, which offer expanded health-related services like kiosks where customers can track their blood pressure, weight and BMI; wellness rooms for hosting health classes; and dietitians who can offer nutritional advice. The company has said it plans to have 1,500 health-hub stores by the end of 2021, many of which will be aimed at patients dealing with chronic diseases.

The drugstore giant is scheduled to report second-quarter earnings Wednesday. Analysts polled by FactSet are expecting per-share earnings of $1.69, the same as a year ago. Sales should grow to $62.629 billion from $46.708 billion in the year-earlier quarter, driven by an expected $17.201 billion boost from Aetna’s health-care benefits business. CVS’s pharmacy services business is expected to bring in $34.135 billion, up from $33.247 billion a year ago, while sales of the retail segment are expected to grow to $21.19 billion from $20.672 billion. 

Things seem to be looking up, but the company still has a significant hurdle to clear. The Justice Department approved the CVS-Aetna merger, which closed in November, after the drugstore chain agreed to divest Aetna’s Medicare Part D business to WellCare Health Plans Inc. WCG, -0.06% However, that may not have been enough — U.S. District Judge Richard Leon is currently reviewing whether or not the Justice Department adequately protected competition when it approved the deal.

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