CVS Heath (CVS) Q4 2023 Earnings

CVS Heath (CVS) Q4 2023 Earnings

CVS location in New York, United States, on Thursday, February 9, 2023.

Stephanie Keith | Bloomberg | Getty Images

CVS Health On Wednesday, it reported fourth-quarter revenue and adjusted earnings that beat expectations, but the company cut its full-year earnings forecast, citing rising medical costs that are holding back the broader insurance industry.

The company lowered its 2024 adjusted earnings forecast to at least $8.30 per share, down from previous guidance of at least $8.50 per share. Analysts surveyed by LSEG were expecting full-year adjusted earnings of $8.49 per share.

CVS also lowered its unadjusted earnings guidance to $7.06 per share, down from at least $7.26 per share.

The company said its new guidance comes after reviewing an analysis of fourth-quarter medical cost trends and recognizing the “potential impacts” of rising medical cost trends in 2024. CVS owns health insurance company Aetna.

Insurance companies such as Humana Medical costs have skyrocketed as a growing number of seniors return to hospitals for procedures they delayed during the pandemic, such as joint and hip replacements.

Here’s what CVS reported for the fourth quarter compared to what Wall Street was expecting, based on a survey of analysts conducted by LSEG, formerly known as Refinitiv:

  • Earnings per share: $2.12 adjusted vs. $1.99 expected
  • he won: $93.81 billion compared to $90.41 billion expected

CVS reported sales of $93.81 billion for the quarter, up nearly 12% from the same period last year. This increase was mainly driven by strength in the health services business.

While CVS beat earnings expectations, its earnings contracted from the previous year.

The company reported net income of $2.05 billion, or $1.58 per share, for the fourth quarter. This compares to net income of $2.33 billion, or $1.77 per share, for the same period last year.

Excluding certain items, such as amortization of intangible assets and capital losses, adjusted earnings per share were $2.12 for the quarter.

The fourth-quarter results come two months after CVS announced it would revamp how it prices prescription drugs and eliminate a complex model that typically determines how much pharmacies are reimbursed and what patients pay for those drugs. The company plans to launch a new model called CostVantage for how payers will reimburse their pharmacies. This model will first be applied to trade creditors starting in 2025.

The results also come as CVS seeks to transform from a major pharmacy chain into a major health care company. The company deepened that progress over the past year with its roughly $8 billion acquisition of health care provider Signify Health and a $10.6 billion deal to buy Oak Street Health, which operates primary care clinics for seniors.

CVS will hold an earnings call with investors at 8:00 a.m. ET on Wednesday.

Strength in the field of health services

The company’s health services segment generated revenue of $49.15 billion for the quarter, an increase of 12.3% compared to the same quarter in 2022.

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, through telehealth and at home.

Those sales beat analyst estimates of $46.35 billion in revenue for the period, according to StreetAccount.

CVS said the increase was driven in part by growth in specialty pharmacy services, which help patients with complex disorders who require specialized treatments. Brand amplification and recent acquisitions also boosted the segment’s results, the company added.

The Health Services Division processed 600.8 million pharmacy claims during the quarter, which is flat compared to the same period last year.

Other sections show growth

CVS’s health insurance segment generated $26.73 billion during the quarter, an increase of approximately 16% from the fourth quarter of 2022. The segment includes Aetna’s Affordable Care Act, Medicare Advantage, and Medicaid plans, as well as dental and vision.

Sales fell below analyst estimates of $27.09 billion for the quarter, according to StreetAccount.

The insurance industry’s medical benefit ratio — a measure of total medical expenses paid compared to premiums collected — rose to 88.5% from 85.8% the previous year. A lower ratio usually indicates that the company collected more in premiums than it paid in interest, resulting in increased profitability.

Analysts had expected this percentage to reach 88.1%, according to StreetAccount estimates.

CVS said the increase was primarily driven by increased Medicare Advantage utilization, including ambulatory care and supplemental care benefits. The company added that commercial and medical use also returned to normal levels.

CVS inside a Target store in Miami Beach, Florida.

Jeff Greenberg | Global Photo Collection | Getty Images

The company’s Pharmacy and Consumer Wellness division generated sales of $31.19 billion during the quarter, an 8.6% increase from the same period last year. This segment dispenses prescriptions at more than 9,000 CVS retail pharmacies and provides other pharmacy services, such as diagnostic testing and vaccination.

Analysts had expected the division to generate sales of $30.15 billion, according to StreetAccount.

CVS said the increase was driven by increased prescription volume, brand inflation and increased contributions from vaccinations, among other factors.

The department filled 431.5 million prescriptions during the quarter, a slight increase from 423.4 million in the same period a year earlier.

CVS store sales were up 11.3% during the three-month period compared to the same period a year earlier, but not evenly across the store. Same-store sales jumped 15.5% in the pharmacy section, but fell 3.1% at the front of the store.

(Tags for translation) Business

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