CVS Well being on Wednesday reported fourth-quarter income and revenue that topped estimates, at the same time as its troubled insurance coverage enterprise continued to see increased medical prices.
The corporate additionally issued a full-year 2025 adjusted earnings outlook of $5.75 to $6 per share, which was in step with Wall Avenue’s expectations. However CVS didn’t present a income forecast for the 12 months.
It caps off the primary full quarter with David Joyner, a longtime CVS government, as CEO of the troubled retail drugstore chain. Joyner succeeded Karen Lynch in mid-October, as CVS struggled to drive increased earnings and enhance its inventory efficiency.
The corporate underwent a administration reshuffle as a part of a broader turnaround plan that features $2 billion in price cuts over the subsequent a number of years. CVS has grappled with rising prices in its insurance coverage unit, Aetna, and a retail pharmacy enterprise pressured by softer client spending and decrease reimbursements for pharmaceuticals.
Here is what CVS reported for the fourth quarter in contrast with what Wall Avenue was anticipating, primarily based on a survey of analysts by LSEG:
- Earnings per share: $1.19 per share adjusted vs. 93 cents per share anticipated
- Income: $97.71 billion vs. $97.19 billion anticipated
Shares rose greater than 6% in premarket buying and selling.
CVS and different insurers resembling UnitedHealth Group and Humana have seen medical prices spike during the last 12 months as extra Medicare Benefit sufferers return to hospitals for procedures they delayed throughout the pandemic.
Medicare Benefit, a privately run medical health insurance plan contracted by Medicare, has lengthy been a driver of progress and earnings for insurers. However buyers have change into involved in regards to the runaway prices tied to these plans, which cowl greater than half of all Medicare beneficiaries.
CVS booked gross sales of $97.19 billion for the fourth quarter, up 4.2% from the identical interval a 12 months in the past as a result of progress in its pharmacy enterprise and insurance coverage unit.
The corporate posted web revenue of $1.64 billion, or $1.30 per share, for the fourth quarter. That compares with web revenue of $2.05 billion, or $1.58 per share, for the year-earlier interval.
Excluding sure gadgets, resembling amortization of intangible property, restructuring fees and capital losses, adjusted earnings had been $1.19 per share for the quarter.
CVS mentioned its fourth-quarter earnings mirror increased medical prices in its insurance coverage enterprise and decrease Medicare Benefit star scores for the 2024 cost 12 months, each of which weighed on the phase’s working outcomes for the quarter. These star scores assist Medicare sufferers examine the standard of Medicare well being and drug plans.
Strain on insurance coverage unit
All three of CVS’ enterprise segments beat Wall Avenue’s expectations for the fourth quarter.
CVS’ insurance coverage enterprise booked $32.96 billion in income throughout the quarter, up greater than 23% from the fourth quarter of 2023. Analysts anticipated the unit to rake in $32.89 billion for the interval, in response to estimates from StreetAccount.
However the enterprise reported an adjusted working lack of $439 million for the fourth quarter, in comparison with an adjusted working revenue of $676 million within the year-earlier interval. That change was pushed by increased medical prices and the corporate’s Medicare Benefit star scores, amongst different components.
The insurance coverage unit’s medical profit ratio — a measure of whole medical bills paid relative to premiums collected — elevated to 94.8% from 88.5% a 12 months earlier. A decrease ratio usually signifies that an organization collected extra in premiums than it paid out in advantages, leading to increased profitability.
The fourth-quarter ratio was decrease than the 95.9% that analysts had been anticipating, StreetAccount estimates mentioned.
CVS’ well being companies phase generated $47.02 billion in income for the quarter, down greater than 4% in contrast with the identical quarter in 2023. Analysts anticipated the unit to publish $44.06 billion in gross sales for the interval, in response to StreetAccount.
That unit consists of Caremark, one of many nation’s largest pharmacy advantages managers. Caremark negotiates drug reductions with producers on behalf of insurance coverage and creates lists of medicines, or formularies, which are coated by insurance coverage and reimburses pharmacies for prescriptions.
CVS’ well being companies division processed 499.4 million pharmacy claims throughout the quarter, down from 600.8 million throughout the year-ago interval because of the lack of an unnamed massive shopper. Tyson Meals instructed CNBC in January 2024 that it dropped CVS because the pharmacy profit supervisor for its roughly 140,000 workers, however it’s unclear if another corporations stopped working with CVS throughout the 12 months, as effectively.
CVS’s pharmacy and client wellness division booked $33.51 billion in gross sales for the fourth quarter, up greater than 7% from the identical interval a 12 months earlier. Analysts anticipated gross sales of $33.03 billion for the quarter, StreetAccount mentioned.
That unit dispenses prescriptions in CVS’ greater than 9,000 retail pharmacies and offers different pharmacy companies, resembling vaccinations and diagnostic testing.
The rise was partly pushed by increased prescription quantity, CVS mentioned. Pharmacy reimbursement strain, the launch of latest generic medication and decrease quantity from front-of-store gadgets like pantry meals and toiletries, together with from decreased retailer depend, weighed on the unit’s gross sales.
