CVS Health on Wednesday reported fourth-quarter income and adjusted earnings that topped expectations, however the firm minimize its full-year revenue outlook, citing higher medical costs which can be dogging the broader insurance industry.
The corporate lowered its 2024 adjusted earnings forecast to no less than $8.30 per share, down from a earlier steerage of no less than $8.50 per share. Analysts surveyed by LSEG have been anticipating full-year adjusted earnings of $8.49 per share.
CVS additionally minimize its unadjusted earnings steerage to no less than $7.06 per share, down from no less than $7.26 per share.
The corporate mentioned its new steerage follows a assessment of its medical value pattern evaluation for the fourth quarter and a recognition of the “potential implications” for elevated medical value traits in 2024. CVS owns well being insurer Aetna.
“Our steerage prudently assumes that the elevated medical value traits we noticed within the fourth quarter will carry ahead into 2024,” CVS Chief Monetary Officer Tom Cowhey mentioned on an earnings name Wednesday.
Insurers equivalent to Humana have been seeing medical costs spike as an rising variety of older adults return to hospitals to bear procedures they’d delayed throughout the pandemic, equivalent to joint and hip replacements.
This is what CVS reported for the fourth quarter in contrast with what Wall Road was anticipating, based mostly on a survey of analysts by LSEG, previously referred to as Refinitiv:
- Earnings per share: $2.12 adjusted vs. $1.99 anticipated
- Income: $93.81 billion vs. $90.41 billion anticipated
Shares of CVS rose virtually 3% in morning buying and selling Wednesday.
CVS booked gross sales of $93.81 billion for the quarter, up virtually 12% from the identical interval a yr in the past. That enhance was primarily pushed by energy in its well being companies enterprise.
Whereas CVS beat earnings expectations, its revenue shrank from the prior year.
The corporate reported web revenue of $2.05 billion, or $1.58 per share, for the fourth quarter. That compares with web revenue of $2.33 billion, or $1.77 per share, for a similar interval a yr in the past.
Excluding sure gadgets, equivalent to amortization of intangible belongings and capital losses, adjusted earnings per share have been $2.12 for the quarter.
The fourth-quarter outcomes come two months after CVS mentioned it is going to revamp the way it costs pharmaceuticals and scrap a posh mannequin that usually units how a lot pharmacies get reimbursed and what sufferers pay for these medicines. The corporate plans to launch a new model, known as CostVantage, for a way payors will reimburse its pharmacies. That mannequin will first apply to industrial payors beginning in 2025.
The outcomes additionally come as CVS pushes to remodel from a significant drugstore chain into a big health-care firm. CVS deepened that push over the past yr with its practically $8 billion acquisition of health-care supplier Signify Health and a $10.6 billion deal to purchase Oak Street Health, which operates primary-care clinics for seniors.
The corporate’s well being companies section generated $49.15 billion in income for the quarter, a 12.3% enhance in contrast with the identical quarter in 2022.
The division contains CVS Caremark, which negotiates drug reductions with producers on behalf of insurance policy, in addition to health-care companies delivered in medical clinics, via telehealth and at house.
These gross sales blew previous analysts’ estimate of $46.35 billion in income for the interval, in line with StreetAccount.
CVS mentioned the rise was pushed partly by development in specialty pharmacy companies, which assist sufferers who’re affected by complicated issues and require specialised therapies. The corporate added that model inflation and its latest acquisitions additionally boosted the section outcomes.
The well being companies division processed 600.8 million pharmacy claims throughout the quarter, which is flat from the year-ago interval.
Signify accomplished 649,000 in-home evaluations throughout the quarter, CVS executives mentioned throughout the name. Oak Road ended the quarter with 204 facilities, and thru January, the variety of Aetna members enrolled in Oak Road clinics has doubled, they added.
CVS’ medical health insurance section generated $26.73 billion throughout the quarter, a roughly 16% enhance from the fourth quarter of 2022. The division contains plans by Aetna for the Reasonably priced Care Act, Medicare Benefit and Medicaid, in addition to dental and imaginative and prescient.
Gross sales fell in need of analysts’ estimate of $27.09 billion for the quarter, in line with StreetAccount.
The insurance coverage section’s medical profit ratio — a measure of complete medical bills paid relative to premiums collected — elevated to 88.5% from 85.8% a yr earlier. A decrease ratio usually signifies that the corporate collected extra in premiums than it paid out in advantages, leading to larger profitability.
Analysts had anticipated that ratio to be 88.1%, in line with StreetAccount estimates.
CVS mentioned the rise was primarily pushed by elevated utilization of Medicare Benefit, together with outpatient and supplemental care advantages, equivalent to dental and imaginative and prescient. Industrial and Medicaid use additionally returned to normalized ranges, the corporate added.
A CVS inside a Goal retailer in Miami Seaside, Florida.
Jeff Greenberg | Common Photographs Group | Getty Photographs
The corporate’s pharmacy and client wellness division booked $31.19 billion in gross sales for the quarter, up 8.6% from the year-ago interval. That section dispenses prescriptions in CVS’ greater than 9,000 brick-and-mortar retail pharmacies and offers different pharmacy companies, equivalent to diagnostic testing and vaccination.
Analysts had anticipated the division to usher in $30.15 billion in gross sales, in line with StreetAccount.
CVS mentioned the rise was pushed by heightened prescription quantity, model inflation and elevated contributions from vaccinations, amongst others components.
The division stuffed 431.5 million prescriptions throughout the quarter, up barely from 423.4 million for the year-earlier interval.
Similar-store gross sales for CVS grew 11.3% throughout the three-month interval in contrast with the identical time a yr earlier, however not equally throughout the shop. Similar-store gross sales jumped 15.5% within the pharmacy division, however have been down by 3.1% within the entrance of the shop.
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