(Reuters) -CVS Health Corp on Wednesday hedged a bit on its long-term target for double-digit earnings growth for next year, pointing to uncertainty around COVID-19 vaccination and testing demand, as well as medical costs, sending shares down 2%.
“Double-digit adjusted EPS growth remains the benchmark that we’re always trying to achieve,” said Chief Financial Officer Shawn Guertin. “But an awful lot has changed since 2019 when that target was out there and stated.”
Demand for COVID-19 tests and vaccines, administered at CVS’ pharmacies and clinics, have had a positive impact on its retail pharmacy business. But costs related to them have weighed on its Aetna health insurance unit.
CVS said it sees a slight rise in its full-year medical costs as it expects some uptick in COVID-19 vaccination and treatment costs and normalization of demand for non-pandemic healthcare services by the fourth quarter.
Uncertainty caused by a recent surge in COVID-19 cases due to the more contagious Delta variant of the coronavirus led CVS to assume a higher estimate of COVID-related costs in the second half of the year, the company said.
CVS cut its 2021 expectations for the number of COVID-19 vaccine doses it would administer at its clinics to a range of 32 million to 36 million, from its prior view of 29 million to 44 million doses.
Drugstore chain Walgreens Boots Alliance Inc also last month said it expects to administer fewer COVID-19 vaccines in its fourth quarter after inoculations peaked earlier in the year. However, on Wednesday it noted that vaccinations have picked up in recent weeks as the reality of the Delta variant has moved some vaccine hesitant people to roll up their sleeves.
CVS on Wednesday also announced higher pay for some of its employees, saying it will raise the minimum wage to $15 an hour effective July next year, from $11 currently.
The wage change, a potential U.S. corporate tax rate rise due to Biden administration policy initiatives and COVID-19 challenges could pose a threat to CVS’ 2022 growth target, Morningstar analyst Julie Utterback said.
After beating Wall Street’s second-quarter adjusted profit estimates by 36 cents, CVS increased its 2021 adjusted earnings forecast to $7.70 to $7.80 per share, from its prior view of $7.56 to $7.68.
(Reporting by Amruta Khandekar and Manojna Maddipatla in Bengaluru and Caroline Humer in New York; Editing by Shounak Dasgupta and Bill Berkrot)