The appearance of the CVS pharmacy in Danville, Pennsylvania.
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CVS Health On Wednesday, revenue and profits exceeded estimates in the fourth quarter, even as the troubled insurance business continued to see higher health care expenses.
The company also released its full-year adjusted earnings outlook for 2025, at $5.75 to $6 per share, which is in line with Wall Street expectations. But the resume does not provide a year’s revenue forecast.
It limits the first full quarter David Joynerlongtime CVS executive, serves as CEO of a troubled retail pharmacy chain. Joyner replaced Karen Lynch in mid-October as CVS struggled to earn higher profits and improve its stock performance.
The company underwent a management restructuring as part of a broader turnaround plan, including $2 billion in fees In the next few years. CVS has seen rising costs in its insurance units, AETNA and retail pharmacy businesses, with softer consumer spending and reduced reimbursement of prescription drugs.
According to LSEG’s survey of analysts, CVS reported this in the fourth quarter compared to Wall Street’s expectations:
- Earnings per share: Adjusted to $1.19 per share, while 93 cents per share is expected
- income: $97.71 billion, estimated $971.9 billion
Stocks on stocks rose more than 6%.
Resume and other insurance companies, e.g. UnitedHealth Group and Human Medical expenses soared last year as more Medicare Advantage patients returned to hospitals.
Medicare Advantage is a privately run health insurance program under Medicare contracts that has long been a driver of insurers’ growth and profits. However, investors are already concerned about the out-of-control expenses associated with these plans, which cover more than half of all Medicare beneficiaries.
CVS’ fourth quarter sales were scheduled at $971.9 billion, up 4.2% from the same period last year due to growth in its pharmacy operations and insurance units.
The company reported $1.64 billion in net revenue, or $1.30 per share in the fourth quarter. By comparison, net income for the full-year period was $2.05 billion, or $1.58 per share.
Excluding certain items, such as amortization of intangible assets, restructuring expenses and capital losses, adjusted revenue is $1.19 per share for the quarter.
CVS said its fourth-quarter revenue reflects higher healthcare expenses for its insurance business and a lower Medicare Advantage Star rating for the 2024 payment year, both of which value the division’s operating results for the quarter. These stars help Medicare patients compare the quality of Medicare health and medication programs.
Insurance unit pressure
All three of CVS’s business units beat Wall Street’s expectations for the fourth quarter.
CVS’ insurance business booked $32.96 billion in revenue in the quarter, up 23% from the fourth quarter of 2023. Analysts expect the unit to earn $32.89 billion during the period.
But the business reported adjusted operating losses in the fourth quarter of the year was $439 million, while adjusted operating income over the year was $676 million. This change is driven by higher healthcare costs and the company’s Medicare Advantage star rating.
The medical benefit rate for insured units, a measure of the total medical expenses paid relative to collection premiums, increased from 88.5% to 94.8% in the same period last year. Lower rates usually indicate that companies collect more premiums than benefits pay for, resulting in higher profitability.
StreetAccount estimates that the fourth quarter ratio was lower than analysts’ expectations of 95.9%.
CVS’s health services sector generated revenue of $47.02 billion for the quarter, down 4% from revenue in the same quarter of 2023. Analysts expect the unit to sell $44.06 billion in sales over the period.
The department includes Caremark, one of the largest pharmacy welfare managers in the United States. Caremark offers drug discounts with manufacturers on behalf of insurance plans and creates a list of drugs or formulas covered by insurance and reimburse the cost of prescription drugs.
CVS’s Health Services Department processed 499.4 million pharmacy claims this quarter, down from 600.8 million in the same period last year, due to the loss of an unnamed large client. Tyson Foods Telling CNBC in January 2024 It dropped the CV As a pharmacy welfare manager with approximately 140,000 employees, it is unclear whether other companies have also stopped working with CVS.
CVS’s Department of Pharmacy and Consumer Health booked $33.51 billion in sales in the fourth quarter, up more than 7% from the same period last year. StreetAccount said analysts expect sales for the quarter to be $33.03 billion.
The unit is prescribed in more than 9,000 retail pharmacies at CVS and offers other pharmacies such as vaccination and diagnostic testing.
The increase is driven in part by higher prescription volumes, CVS said. Pharmacy reimbursement pressure, the launch of new general medicines, and low sales of stores such as in-store merchandise such as food and toiletries, including reduced store counts.
