(Reuters) - Drugstore chain operator CVS Health Corp (CVS.N) reported a better-than-expected profit, helped by strong demand for its pharmacy benefit management (PBM) services, and raised its full-year adjusted profit forecast.
Shares of the No. 2 U.S. drugstore chain by store count, rose 3 percent to $96.30 in premarket trading on Tuesday.
Revenue in CVS’s pharmacy business rose 20.7 percent to $5.1 billion in the second quarter ended June 30, due to increased pharmacy network claim volume and growth in specialty pharmacy.
CVS boosted its specialty pharmacy business, which provides drugs to people with expensive chronic conditions such as rheumatoid arthritis, with its $10.1 billion acquisition of Omnicare Inc in August 2015.
“We see 2017 shaping up to be another very successful PBM selling season, with substantial gross and net new business to date,” Chief Executive Larry Merlo said.
The Woonsocket, Rhode Island-based company raised full-year adjusted earnings to $5.81-$5.89 per share, from $5.73-$5.88 it had expected earlier.
Net income attributable to CVS Health fell 27.4 percent to $924 million in the second quarter.
Excluding items, CVS earned $1.32 per share, topping the average analyst estimate of $1.30 per share, according to Thomson Reuters I/B/E/S.
However, comparable front-end store sales, which include over-the-counter drugs and cosmetics, fell 2.5 percent in the quarter, due to lower customer traffic.
CVS is not investing in its front-end operations, while rivals such as Walgreens Boots Alliance Inc (WBA.O) are stepping up the pace of innovation and investment, said Neil Saunders, CEO of research firm Conlumino.
Walgreens has been working to revive front-end sales, mainly by sprucing up its beauty business, which is a big traffic driver. It is rolling out a revamped beauty section at more than 1,800 stores by end of 2016.
The company’s net revenue rose 17.6 percent to $43.73 billion, rising by double-digit percentages for the fourth straight quarter. Analysts on average had expected revenue of $44.28 billion.
Up to Monday’s close, the stock had fallen nearly 17 percent in the last 12 months.
Reporting by Subrat Patnaik in Bengaluru; Editing by Saumyadeb Chakrabarty and Shounak Dasgupta