CVS Health (CVS) Reaffirms FY16, FY17 Outlook; to Raise Dividend 18% in 2017

CVS Health (NYSE: CVS) held its annual Analyst Day in New York City today, outlining strategies for how the company will drive long-term growth and shareholder value. In his opening remarks, CVS Health President and CEO Larry Merlo stated, "By making care more affordable, accessible and effective, we can deliver value to all health care stakeholders, allowing us to be a partner of choice as they look to achieve their health care goals. Despite all the changes happening in health care, success will ultimately be determined by how effective you are at executing on these three objectives. And we remain confident that CVS Health is well-positioned to deliver on all three."

"We continue to have the most extensive suite of enterprise assets," continued Merlo. "On a standalone basis, each one would be market leading. Yet what really sets them apart is our ability, largely through technology, to integrate pharmacy care from the payor, to the provider, to the patient." Borrowing a colloquial phrase widely used in telecommunications to refer to the final leg of delivering services to customers, Merlo declared, "We own the last mile of service in the delivery of health care. If you think about all of our enterprise assets, each one delivers care directly to the health care consumer. And keep in mind that retail pharmacy is quite often the front door to health care, with the highest frequency of patient interaction. The face-to-face interactions between patients and our 30,000 pharmacists and clinicians provide us with an unmatched ability to help change consumer behavior and drive better health outcomes at a lower cost. With increasing consumerism and what we call the "retailization" of health care, improving clinical outcomes and patient satisfaction is of significant value to our health care partners."

Also at the meeting, Dave Denton, executive vice president and chief financial officer, reviewed the company's expectations for 2016 and 2017 while also discussing the company's long-term growth targets and plans to maximize shareholder value.

"Over the past three years, our strong earnings growth, solid working capital management, disciplined capital investments and sound debt management have enabled us to generate a significant amount of cash that has been made available for enhancing shareholder value, and we have done just that. We have a proven track record of success in meeting our long-term growth targets and we are targeting, on average, 10% growth in Adjusted EPS longer-term. We also expect $7 billion to $8 billion of cash to be available annually for enhancing shareholder value."

"Given the recent changes in the marketplace and our outlook for 2017, we have put a plan in place to return to more robust levels of growth," Denton added. "One element of this plan relates to our multi-year enterprise streamlining initiative, which aims to further improve productivity and to solidify the company's low-cost provider status. We expect to deliver approximately $700 to $750 million in annual savings across the enterprise by 2021, with cumulative savings of nearly $3 billion over the next five years. This will also free up capital for strategic investments that can help drive the continued growth and success of the enterprise," Denton concluded.

2016 and 2017 Guidance

GAAP diluted EPS from continuing operations for 2016 and 2017 has been updated to reflect an estimated $35 million asset impairment charge and an estimated $230 million lease obligation charge, respectively, for store rationalization related to the enterprise streamlining initiative. GAAP diluted EPS is now expected to be in the range of $4.82 to $4.88 in 2016 and $5.02 to $5.18 in 2017. The company reaffirmed its previous Adjusted EPS outlook for both 2016 and 2017. The company expects to deliver Adjusted EPS of $5.77 to $5.83 in 2016 and $5.77 to $5.93 in 2017. The Adjusted EPS guidance assumes the completion of $5 billion in share repurchases during 2017. The company reaffirmed its previous cash flow outlook for 2016, and expects to deliver cash flow from operations of $9.1 billion to $9.3 billion and free cash flow of $6.8 billion to $7.0 billion this year. In 2017, the company expects to deliver cash flow from operations of $7.7 billion to $8.6 billion and free cash flow of $6.0 billion to $6.4 billion.

The company also announced that its Board of Directors has approved an 18 percent increase in the annual dividend in 2017, an increase that translates to $2.00 per share, up 30 cents per share over 2016. This is the company's fourteenth consecutive year with a dividend increase. In addition, as stated on the company's third quarter earnings call, with a new $15 billion share repurchase authorization, the company now has more than $18 billion authorized to be used for share repurchases over the next few years.

In other presentations, Jon Roberts, president of CVS Caremark, addressed how CVS Health's pharmacy benefit management business continues to be the PBM of choice with another successful selling season and is continually innovating to meet the latest health care challenges. Alan Lotvin, executive vice president of CVS Specialty, discussed how the unique integrated PBM-specialty model is best-positioned to meet the diverse and complex needs of patients, payors, and providers. Helena Foulkes, president of CVS Pharmacy, outlined how the retail pharmacy business can be the best partner for all PBMs and health plans by leveraging the company's enterprise assets and offering a menu of bundled services that can provide significant value to payors. She also highlighted growth strategies for the front store, long-term care pharmacy and MinuteClinic businesses.

Audio and Video Webcast

The company simultaneously broadcast an audio and video webcast of the meeting through the Investor Relations section of the CVS Health website at http://investors.cvshealth.com. This webcast and supporting materials will be archived and available on the website for a one-year period following the meeting.

You May Also Be Interested In

• Vail Resorts (MTN) Reports Certain Ski Season Metrics for the Season-to-Date Period Ended April 14
• GXO Logistics Inc. (GXO) PT Raised to $74 at Stifel
• Norfolk Southern (NSC) corrects Ancora's false and misleading statements