CVS Health shares fall on earnings miss, lowered outlook

1st May 2024 13:42

(Sharecast News) - Shares in pharmacy giant CVS Health were falling on Wednesday, after its first-quarter results fell short of expectations, with both revenue and adjusted earnings missing the mark.

The company also revised its full-year profit forecast downward due to escalating medical costs impacting the wider US insurance sector.

For the first quarter, CVS reported adjusted earnings per share of $1.31, falling short of the expected $1.69, and revenue of $88.44bn, slightly below the anticipated $89.21bn.

Net income for the quarter was $1.12bn, or 88 cents per share, compared to $2.14bn, or $1.65 per share, for the same period last year.

While pharmacy and insurance unit sales saw growth, CVS said it was facing challenges in its health services segment.

Sales in that division, including pharmacy benefit manager Caremark, declined due to the loss of a large client.

Recent decisions by companies like Tyson Foods and Blue Shield of California to switch pharmacy benefit managers had added pressure to CVS and other established players in the industry.

It said it now anticipated adjusted earnings of at least $7 per share for 2024, a significant decrease from the previously-projected $8.30 per share.

Analysts surveyed by LSEG had pencilled in full-year adjusted profits of $8.28 per share.

CVS also revised its unadjusted earnings guidance to at least $5.64 per share, down from at least $7.06 per share.

The company put its lowered outlook down to persisting higher medical costs, particularly within its insurance arm, throughout the year.

CVS owns major US health insurer Aetna.

Rising medical costs, notably driven by an uptick in procedures postponed during the pandemic, were affecting insurers across the US market.

CVS said its health insurance segment saw a substantial revenue increase, but reported lower-than-expected adjusted operating income.

The medical benefit ratio, indicating the balance between premiums collected and benefits paid out, rose to 90.4%, driven by increased use of Medicare Advantage and other factors.

At 0852 EDT (1352 GMT), shares in CVS Health Corporation were down 13.16% in premarket trading in New York, at $58.80.

Reporting by Josh White for Sharecast.com.