CVS Health (NYSE:CVS) exceeded third-quarter earnings expectations, largely attributable to the growth of its pharmacy benefits management division. However, the healthcare giant remains cautious about its performance in the upcoming year.
Interim Chief Financial Officer Tom Cowhey advised analysts on Wednesday to be conservative in their expectations, suggesting that investors should anticipate adjusted earnings to fall within the lower range of $8.50 to $8.70 per share. This aligns with the company’s projected full-year earnings for the current year.
CVS Health, operating one of the nation’s largest drugstore chains with over 9,000 locations, manages prescription drug plans for major clients such as insurers and employers through its extensive pharmacy benefit management business. Additionally, it provides health insurance coverage to more than 25 million individuals through its Aetna subsidiary.
During the third-quarter earnings call, company leaders typically provide preliminary insights into the following year’s outlook. Cowhey expressed optimism about growth from the core business in 2024 and anticipated cost savings from a previously announced cost-cutting initiative. However, challenges are expected due to a decline in ratings for its Medicare Advantage health insurance plans and an ongoing increase in healthcare utilization.
Medicare Advantage plans, privately administered versions of the federal government’s Medicare program primarily targeting individuals aged 65 and older, have seen a surge in healthcare procedures, potentially driven by the waning impact of the COVID-19 pandemic. The increased healthcare costs may persist longer than initially projected, affecting the business.
In the third quarter, CVS Health reported robust growth across all product lines, resulting in total quarterly revenue exceeding $89.76 billion, significantly surpassing Wall Street’s expectations. The company’s profit amounted to $2.26 billion, a notable recovery from last year’s loss of over $3 billion, which was attributed to setting aside funds for potential opioid litigation.
Earnings for the current quarter, adjusted for one-time gains and expenses, reached $2.21 per share, outperforming Wall Street’s anticipated $2.13 per share. Pharmacy benefit management revenue surged by 8% to $46.89 billion, and health insurance enrollment increased by nearly 6% year-over-year, despite some customer attrition in Medicaid plans managed for states earlier in the year.
CVS Health initiated a cost-cutting program this year, and CEO Karen Lynch reported that they have successfully closed 564 out of the 900 planned store closures. Despite these positive financial results, shares of CVS Health Corp., headquartered in Woonsocket, Rhode Island, dipped by 54 cents to $68.47 in midday trading on Wednesday, while broader market indices experienced slight gains.
Featured Image- Megapixl @Jetcityimage
