CVS Health (CVS) earnings Q1 2024
A person walks past a CVS Pharmacy store in Manhattan, New York on November 15, 2021.
Andrew Kelly | Reuters
The drugstore chain expects adjusted earnings of at least $7 per share for 2024, down from previous guidance of at least $8.30. per share. Analysts surveyed by LSEG expected adjusted earnings of $8.28 per share for the full year.
CVS also lowered its unadjusted earnings forecast to at least $5.64 per share, from at least $7.06 per share.
The company said its new outlook assumes that rising medical costs in its insurance business during the first quarter will persist throughout the year. CVS owns health insurer Aetna.
Karen Lynch, CEO of CVS, nevertheless said in a statement that “the current environment does not diminish our opportunities, our enthusiasm or the long-term earning capacity of our company.” The company is confident that “we have a path forward to address the near-term challenges of Medicare Advantage,” she added.
Insurers such as Humana and UnitedHealth Group have seen medical costs rise as more Medicare Advantage patients return to the hospital for procedures they delayed during the pandemic, such as joint and hip replacements. hip.
Medicare Advantage, a private health insurance plan underwritten by Medicare, has long been a key source of growth and profits for the insurance industry. But investors have become more concerned about the spiraling costs associated with these plans, which cover more than half of all Medicare beneficiaries.
Here’s what CVS reported for the first quarter compared to what Wall Street expected, based on a survey of analysts by LSEG:
- Earnings per share: $1.31 adjusted vs. $1.69 expected
- Income: $88.44 billion versus $89.21 billion expected
CVS reported net income of $1.12 billion, or 88 cents per share, for the first quarter. That compares to net income of $2.14 billion, or $1.65 per share, for the same period a year ago.
Excluding certain items, such as amortization of intangible assets and capital losses, adjusted earnings per share came to $1.31 for the quarter.
CVS reported revenue of $88.44 billion for the quarter, up nearly 4% from the year-ago period. This increase is due to its pharmacy operations and insurance unit.
Meanwhile, CVS said sales in its health services segment, which includes pharmacy benefit manager Caremark, declined during the period. This was mainly due to the loss of a major unnamed customer, the company said.
In January, Tyson Foods announced that it had dropped Caremark from CVS and instead chosen PBM startup Rightway to manage pharmacy benefits for its 140,000 employees starting this year. This came a few months after Blue Shield of California, one of the largest in the nation’s most populous state, also dropped Caremark and instead partnered with Amazon Pharmacy and the company Cost More Drugs by Mark Cuban.
The moves add to a shake-up in the health care industry, as startups promising lower costs and transparency challenge larger PBMs and pressure them to change their own business models.
The first-quarter results come as CVS works to transition from a large drugstore chain to a major health care company. CVS has deepened this dynamic over the past year with the nearly $8 billion acquisition of healthcare provider Signify Health and a $10.6 billion deal to buy Oak Street Health, which operates primary care clinics for the elderly.
CVS’s health insurance segment generated $32.24 billion in revenue during the quarter, an increase of more than 24% from the first quarter of 2023. The division includes Aetna’s plans for Affordable Care Act, Medicare Advantage and Medicaid, as well as dental and vision care. .
Sales topped analysts’ estimate of $30.69 billion for the period, according to StreetAccount.
But the insurance division reported adjusted operating income of just $732 million for the first quarter. That’s well below analysts’ expectations of $1.19 billion, according to FactSet.
The segment’s medical benefits ratio – a measure of total medical costs paid compared to premiums collected – increased to 90.4%, up from 84.6% a year earlier. A lower ratio generally indicates that the company collected more in premiums than it paid out in benefits, resulting in higher profitability.
Analysts expected that ratio to be 88.4%, according to FactSet estimates.
CVS said the increase was primarily due to increased use of Medicare Advantage and the “adverse impact” of the company’s Medicare Advantage star ratings. These ratings help Medicare patients compare the quality of Medicare health and drug plans.
CVS added that an extra day in 2024 due to the leap year also contributed to a higher medical benefits ratio.
A worker stocks shelves at a CVS pharmacy on February 7, 2024 in Miami, Florida.
Joe Raedle | Getty Images
The company’s health services segment generated $40.29 billion in revenue for the quarter, down nearly 10% from the same quarter of 2023.
The division includes CVS Caremark, which negotiates drug discounts with manufacturers on behalf of insurance plans, as well as health care services provided in medical clinics, via telehealth and at home.
Those sales were in line with analysts’ estimate of $40.29 billion in revenue for the period, according to FactSet.
CVS said the decline was due in part to the loss of the anonymous customer and “continued price improvements for pharmacy customers.” The decrease was partially offset by growth in Oak Street Health, Signify Health and specialty pharmacy services, which help patients with complex conditions requiring specialized therapy.
The health services division processed 462.9 million pharmaceutical claims during the quarter, down from 587.3 million last year.
CVS’ pharmacy and consumer wellness division reported first-quarter revenue of $28.73 billion, up nearly 3% from the same period a year ago. This segment delivers prescriptions to CVS’s more than 9,000 brick-and-mortar retail pharmacies and provides other pharmacy services, such as diagnostic testing and immunizations.
Analysts expected the division to generate revenue of $29.5 billion, according to FactSet.
The company said the increase was primarily due to increased prescription volume, including increased contributions from vaccinations. Pressure on pharmacy reimbursements, the launch of new generic drugs and declining store volume, among other factors, weighed on the division’s sales.
News Source : www.cnbc.com
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