CVS Health is setting 2019 earnings expectations well below Wall Street forecasts, as the company struggles to fix part of its business while blending in a major acquisition and attempting to change how customers use its stores.
The drugstore chain and pharmacy benefit manager also is dealing with industry-wide pressure to reduce what customers pay for prescriptions. CVS Health shares sank while broader indexes stayed largely flat Wednesday after the company unveiled its 2019 forecast and detailed fourth-quarter results.
CVS Health booked a $2.2 billion charge in the final quarter of 2018 from a business that provides services to long-term care facilities. That’s in addition to a $3.9 billion charge notched in last year’s second quarter.
That adds up to more than half of the $10 billion price CVS Health paid in a 2015 deal to buy pharmacy distributor Omnicare and expand into dispensing prescription drugs to assisted living and skilled nursing homes. CVS CEO Larry Merlo said then that he saw the deal as a “substantial growth opportunity,” given the aging U.S. population.
But the company said Wednesday that it has been dealing with challenges like low occupancy rates in skilled nursing locations and the bankruptcy of a significant customer. Merlo told analysts the company still sees growth opportunities in parts of that business, and he expects the performance to improve.