Rising Cost For Health Insurers Bites CVS Health's Q1 Profit, Stock Tanks

On Wednesday, CVS Health Corp CVS reported first-quarter sales of $88.4 billion, up 3.7% year over year, missing the consensus of $89.21 billion. 

This was largely due to strong growth in the Health Care Benefits and Pharmacy and consumer Wellness segments, partially offset by a decline in the Health Services segment.

Adjusted EPS of $1.31 decreased from $2.20 in the prior year, missing the consensus of $1.69, primarily due to a decline in the Health Care Benefits segment’s operating results, reflecting utilization pressure in the company’s Medicare business.

Adjusted operating income decreased 32.3%.

Also Read: Elevance, CVS Health Are First Medicare Insurers To Cover Novo Nordisk’s Weight Loss Sensation Wegovy.

“The current environment does not diminish our opportunities, enthusiasm, or the long-term earnings power of our company. We are confident we have a pathway to address our near-term Medicare Advantage challenges,” said Karen Lynch, CVS Health President and CEO.

Health Care Benefits segment revenues increased 24.6% to $32.2 billion, driven by Medicare and Commercial product line growth.

The Medical benefit ratio increased to 90.4% from 84.6% a year ago, driven by increased Medicare utilization, the unfavorable impact of the company’s 2024 Medicare Advantage star ratings, and the impact of an additional day in 2024 due to the leap year.

Medical membership of 26.8 million increased by 1.1 million compared with December 31, 2023, reflecting increases in the Medicare and Commercial product lines. These increases were partially offset by a decline in the Medicaid product line.

Health Services segment revenues decreased 9.7% to $40.3 billion, primarily driven by the previously announced loss of a large client and continued pharmacy client price improvements.

The Pharmacy & Consumer Wellness segment sales increased 2.9% to $28.7 billion, driven by increased prescription volume, including increased contributions from vaccinations and pharmacy drug mix.

Guidance: Recognizing the potential for continued elevated medical cost trends in the remainder of 2024, CVS Health revised its full-year 2024 guidance to reflect the assumption that most of this pressure will persist throughout 2024.

CVS Health cuts 2024 adjusted EPS guidance to at least $7.00 from at least $8.30 versus consensus of $8.27.

The company revises 2024 cash flow from operations guidance to at least $10.5 billion from at least $12 billion.

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Price Action: CVS shares are down 12.90% at $58.96 during the premarket session at the last check Wednesday.

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