CVS hikes wages and announces Q4 earnings

Shannon Stapleton | Reuters

A CVS Pharmacy store is seen in the Manhattan borough of New York City, New York, U.S., November 30, 2017.

CVS Health will increase employee pay and offer benefits to some employees using windfall from the new tax law.

CVS will increase pay for hourly employees to $11 an hour starting in April. The starting wage is currently $9 per hour.

The company said it also plans to adjust pay ranges and rates for many of its retail pharmacy technicians, front store associates and other hourly retail employees later in the year. CVS will offer full-time employees up to four weeks of paid parental leave.

The health-care company has more than 240,000 employees.

CVS said it posted a $1.5 billion benefit related to the new tax law when it announced fourth-quarter earnings results on Thursday. It expects the legislation to deliver a $1.2 billion cash bonus in 2018.

CVS plans to invest $425 million annually in employee benefits.The company anticipates spending at least $275 million of the tax boost on investments in data analytics, care management solutions and store service offering pilots to improve health outcomes and lower costs for patients, and half of the benefit on debt reduction related to its planned acquisition of Aetna.

“Today, we’re building on the investments we’ve been making in our employees, in their wages, benefits and career development,” CEO Larry Merlo said in a statement. “It’s our employees who drive our performance and we appreciate how hard they work every day to deliver on our purpose of helping people on their path to better health.”

CVS posted better-than-expected fourth-quarter results, beating Wall Street’s earnings and revenue estimates.

In the fourth quarter, CVS reported a net income of $3.29 billion, or $3.22 per share, compared with earnings of $1.71 billion or $1.59 per share, in the year-earlier quarter.

However, after stripping out special items, such as a $1.5 billion benefit related to the new tax law and a $56 million charge related to the proposed acquisition of Aetna, the company earned $1.92 per share, above analysts’ estimates of $1.89 cents per share.

CVS’ revenue grew 5 percent to $48.39 billion from $45.97 billion in the year earlier. Its pharmacy services revenue surged 9.3 percent from the year-ago quarter, reaching $34.15 billion, up from $31.26 billion.

Same-store sales for the pharmacy chain’s front store, which doesn’t include pharmacy, dipped 0.7 percent in the quarter.

Shares of CVS rose 0.9 percent in premarket trading.