CVS Health, one of the largest healthcare companies in the United States, has reported fourth-quarter revenue and earnings that exceeded expectations. However, the company has also cut its full-year profit outlook due to higher medical costs affecting the insurance industry as a whole. CVS Health owns health insurer Aetna and has been impacted by rising medical costs, particularly among older adults who are undergoing delayed procedures such as joint and hip replacements.
The company has revised its adjusted earnings forecast for 2024 to at least $8.30 per share, down from the previous guidance of at least $8.50 per share. Analysts had anticipated full-year adjusted earnings of $8.49 per share. CVS has also lowered its unadjusted earnings guidance to $7.06 per share, down from at least $7.26 per share. This adjustment comes after a review of the company’s medical cost trend analysis for the fourth quarter and an acknowledgment of the potential implications for elevated medical cost trends in 2024.
Despite the revised profit outlook, CVS Health reported impressive fourth-quarter results. The company’s earnings per share were $2.12 adjusted, surpassing the expected $1.99 per share. Additionally, revenue for the quarter reached $93.81 billion, beating the anticipated $90.41 billion. The increase in revenue was primarily driven by the strength of CVS Health’s health services business.
However, while CVS Health exceeded earnings expectations, its profit declined compared to the previous year. Net income for the fourth quarter was $2.05 billion, or $1.58 per share, down from $2.33 billion, or $1.77 per share, in the same period a year ago. Adjusted earnings per share for the quarter were $2.12, excluding certain items such as amortization of intangible assets and capital losses.
In an effort to transform from a major drugstore chain into a large healthcare company, CVS Health has made strategic acquisitions. The company acquired healthcare provider Signify Health for nearly $8 billion and primary-care clinic operator Oak Street Health for $10.6 billion. These acquisitions align with CVS Health’s goal of expanding its presence in the healthcare industry.
CVS Health’s health services segment, which includes CVS Caremark and various healthcare services, generated $49.15 billion in revenue for the quarter, a 12.3% increase compared to the same period in the previous year. The division’s growth was driven by specialty pharmacy services, brand inflation, and recent acquisitions. The health insurance segment, which encompasses plans by Aetna for the Affordable Care Act, Medicare Advantage, and Medicaid, generated $26.73 billion in revenue, a 16% increase from the fourth quarter of the previous year.
The pharmacy and consumer wellness division of CVS Health reported $31.19 billion in sales for the quarter, an 8.6% increase from the same period a year ago. This segment operates CVS’s brick-and-mortar retail pharmacies and provides various pharmacy services. The increase in sales was attributed to higher prescription volume, brand inflation, and increased contributions from vaccinations.
Despite the overall positive performance, same-store sales for CVS experienced mixed results. While same-store sales grew by 11.3% during the quarter compared to the previous year, there was a significant difference between the pharmacy division and the front of the store. Same-store sales in the pharmacy division increased by 15.5%, while sales in the front of the store declined by 3.1%.
CVS Health’s fourth-quarter results come as the company plans to revamp how it prices prescription drugs. The company intends to introduce a new model called CostVantage, which will change how payors reimburse CVS pharmacies. This new model will be implemented for commercial payors starting in 2025.
Overall, CVS Health has demonstrated strong performance in its fourth-quarter results, exceeding expectations in revenue and adjusted earnings. However, the company’s decision to lower its full-year profit outlook reflects the challenges posed by rising medical costs in the insurance industry. As CVS Health continues to transform into a prominent healthcare company, its strategic acquisitions and focus on expanding its health services business position it for future growth and success.