Late last year, things weren't exactly looking up for CVS Health (NYSE: CVS). In November, Amazon (NASDAQ: AMZN) launched its online pharmacy service, which not only allows customers to order prescriptions at a competitive price point, but also comes with the same expedited shipping Prime members are used to.
But earlier this month, CVS reported strong first-quarter earnings. And when we consider the role it's played during the pandemic, it's easy to see why the well-known pharmacy chain has thrived.
A solid quarter
For the fiscal first quarter ended March 31, CVS reported a net income of $2.22 billion, or $1.68 per share, up from $2.01 billion, or $1.53 per share, a year prior. Earnings per share came in at $2.04 versus Wall Street's estimated $1.72, while revenue was recorded at $69.1 billion, an improvement from the $68.39 billion analysts had expected.
Not only did CVS have a stellar first quarter, but it's since upgraded its outlook for the remainder of the year. It now says it expects 2021 earnings to range between $6.24 and $6.36 per share, and after adjustments, between $7.56 and $7.68 per share.
A pandemic-driven boost
Early on in the pandemic, customers flocked to CVS to load up on supplies and prescriptions. But that rush was short=lived. Many customers stayed away from stores during the pandemic, and due to the practice of mask-wearing, there were fewer customers coming in for flu and cold supplies.
But while the pandemic may have, to some degree, kept customers out of CVS, it also helped draw customers in -- especially over the past quarter, once CVS became a well-known provider of coronavirus vaccines. In addition to vaccines, CVS has also served as a testing center for the coronavirus, which has also helped get customers in the door.
Will CVS continue to thrive in a post-pandemic world?
Clearly, the pandemic turned CVS into a hot spot earlier this year, and since a fair percentage of the public has yet to be vaccinated, there's a good chance CVS will continue to ride that wave throughout 2021. This especially holds true given that vaccine approval for adolescents is expected to come through at some point before the year is over.
But what happens once the pandemic is truly a thing of the past? Will CVS suffer a blow?
Not necessarily. For one thing, we may never be fully rid of COVID-19. As more people get vaccinated and treatments are developed, the public health threat it poses may wane, but that doesn't mean the virus will simply disappear from circulation. In fact, there's a good chance people will need ongoing protection from coronavirus in the form of vaccine booster shots -- something CVS will likely be in line to administer.
As such, there's a good chance CVS will be able to build on its recent strong quarter and hold its own, even in the face of competition from the likes of Amazon. And that, of course, is good news for real estate investors.
Right now, CVS is a shopping center mainstay, and if the pharmacy were to shutter locations, a vacancy crisis could ensue. Based on the company's most recent numbers, that's highly unlikely to happen anytime soon. In fact, if ongoing coronavirus booster shots do become necessary, that alone could motivate CVS to keep underperforming locations up and running, so investors should be happy with the company's outlook and long-term potential.