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CVS banks on future gains from pediatric vaccines as hesitant adults drive recent COVID vaccination decline

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CVS Health Corp. said Tuesday that it has recently seen a decline in the number of adults coming in for COVID-19 vaccine shots, but its outlook for the rest of the year assumes gains from the administration of pediatric vaccines.

“[R]ecently, we have seen some vaccine hesitancy. We’ve seen a drop off of around 30% as you look at some of the recent data there,” said Eva Boratto, CVS’s
CVS,
+4.14%

chief financial officer on the earnings call, according to a FactSet transcript.

“In our outlook, we are assuming the pediatric vaccine. But what’s not included in our current estimates is the impact of a booster should there be one later this year.”

Pfizer Inc.
PFE,
+0.18%

has said it expects the U.S. Food and Drug Administration to grant emergency use authorization for its COVID-19 vaccine in 12-to-15-year olds next week.

See: Pfizer COVID-19 vaccine expected to get FDA authorization for 12- to 15-year-olds next week

CVS reported earlier Tuesday first-quarter earnings and revenue that beat expectations, and raised its full-year guidance. The company now expects adjusted earnings per share of $7.56 to $7.68, up from $7.39 to $7.55. The FactSet consensus is for EPS of $7.54.

The results sent shares up 3.9% in Tuesday trading, with the price heading toward the highest close since November 2018.

CVS says it administered more than 17 million vaccines through April, and more than 23 million COVID tests. The pharmacy retailer is now administering COVID vaccines in 49 states at more than 8,300 locations.

The company is seeing 90% compliance on second doses, which Chief Executive Karen Lynch attributed to the practice of scheduling both vaccines at the same time, as well as providing just the second dose.

“We are successfully driving health services engagement among customers who are new to CVS Health through COVID testing and vaccines,” she said.

“This has helped somewhat offset the impact of a weak flu, cough and cold season. Although early, we have seen improvement in April, as vaccinated customers are more actively shopping in CVS locations, part of a nationwide trend.”

Also: Pfizer beats earnings expectations and lifts guidance, as COVID-19 revenue outlook increases 73%

The company is also beefing up the services it offers, for instance, with the expansion of mental health services through its MinuteClinic and HealthHUB programs. CVS has observed an increase in substance abuse, domestic violence, depression and anxiety during the course of the pandemic.

“What we’ve done is we have put licensed clinical social workers in a certain number of our health hubs, and what we are trying to do is really connect the physical health with the mental health,” Lynch said.

CVS might be growing in some parts of the business, but the retail segment is still struggling, notes Neil Saunders, managing director at GlobalData.

“While CVS has drawn in customers on the testing and vaccination side, there is little evidence to suggest that this is spilling over into the general retail part of its business,” Saunders wrote.

And: Moderna to boost COVID-19 vaccine production at Massachusetts site by 50%

Revenue for the retail segment grew 2.3% for the quarter, reaching $23.27 billion. However, front-store sales, which includes items customers would pick up on a shopping trip rather than a prescription-related transaction, declined.

Still, Saunders takes into account the ways in which the pandemic skewed customer activity.

“Of course, some of the decline is down to CVS lapping a period of elevated demand in March of last year when many consumers were stocking up on general merchandise and over-the-counter medicines and vitamins at the start of the pandemic,” Saunders said.

Mizuho analysts led by Ann Hynes think the “conservative” guidance is a “prudent” move given the retail segment decline.

Don’t miss: Clorox is still selling many more cleaning products than it was pre-pandemic

“The vaccine rollout should help front-store retail trends recover in 2H:21, but increased vaccine hesitancy could result in vaccines administered coming in at the low-end of +2%-to-3% of total script guidance,” Mizuho said.

“Luckily, higher administration costs should offset any headwind.”

Mizuho rates CVS stock buy with an $82 price target.

CVS shares have gained 18.4% for the year to date, outpacing the benchmark S&P 500 index
SPX,
-1.05%
,
which is up 10.2% for the period.