The transformation of CVS is underway

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The transformation of CVS is underway

By Gina Acosta - 02/08/2018
The CVS-Aetna deal is expected to close in the second half of 2018. 

CVS increased its earnings and profit during a fourth quarter buoyed by a $1.5 billion tax cut and an upcoming merger with Aetna.

The company said it will use the break it gets from the Trump tax cut to raise starting pay for its hourly workers and cut debt ahead of its $69 billion acquisition of Aetna. CVS says it will raise its starting wage for hourly workers to $11 an hour from $9. It will also start a parental leave program that gives full-time employees with a new baby four weeks off at full pay.

The company said it also anticipates spending at least $275 million of the tax windfall on investments in the business, including data analytics, care management solutions and pilot programs.

“With $1.2 billion in cash benefits from the Tax Cuts and Jobs Act, we will be able to make strategic investments in our business in 2018 to stimulate greater growth over the longer term, and our updated guidance reflects this," said Executive Vice President and Chief Financial Officer David Denton. "These investments will accelerate our ability to continue to improve health outcomes and lower costs for patients. Additionally, we will spend at least half of the benefits on debt reduction as we look to lower our leverage ratio.”

The potential for greater data analytics is one reason CVS said in December it would buy Aetna Inc., which covers more than 22 million people as the nation's third-largest health insurer. Earlier this month CVS announced that the U.S. Department of Justice is asking for more information about the Aetna deal, which is expected to close in the second half of 2018. 

For the fourth quarter ended Dec. 31, the company reported $1.92 in earnings per share, excluding the $1.2 billion tax benefit from the new law. Net income attributable to the company rose 92.6 percent to $3.3 billion, or $3.2 per share.

The retail giant also posted $48.4 billion in total revenue, a 5.3% increase since the same period last year. Same store sales increased 0.1%, while pharmacy same store sales increased 0.4%. For the whole year, however, same store sales fell on both fronts, decreasing 2.6%.

For the full year, CVS Health generated a profit of $6.62 billion on nearly $185 billion in revenue. 

Several other retailers also have announced employee bonuses or enhanced benefits since Republican lawmakers and President Trump sped a $1.5 trillion tax cut plan into law at the end of last year.

CVS operates more than 9,800 retail locations and more than 1,100 medical clinics.

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