CVS health On Wednesday, sales and profits reported in the fourth quarter, which took over estimates, even when the insurance business that has become difficult to determine higher medical costs.
The company also issued an adjusted earnings outlook of 5.75 to 6 USD per share from 2025, which corresponded to the expectations of Wall Street. However, CVS did not deliver sales forecast for the year.
With David Joyner, a long -time CVS manager, as CEO of unrest retail Drugsree chain, the first full quarter. Joyner succeeded Karen Lynch in mid -October because CVS had difficulty making higher profits and improving his stock performance.
As part of a more comprehensive turnaround plan, which contains a reduction in costs of 2 billion US dollars in the next few years, the company was enforced. CVS has developed with rising costs in its insurance unit Aetna and a softer for prescription drugs under pressure set by softer consumer expenditure and lower refunds for prescription medication.
CVS reported in the fourth quarter compared to the expectations of Wall Street, based on a survey of LSEG analysts:
- Win each share: 1.19 USD per share adapted compared to 93 cents per share expected
- Revenue: $ 97.71 billion compared to USD 97.19 billion
The company's shares closed 15% higher on Wednesday.
CVs and other insurers such as Unitedhealth Group and Humana have spanned medical costs last year, since more Medicare advantages return to patients in hospitals to delay procedures that they delay during pandemic.
Medicare Advantage, a private health insurance plan from Medicare, has long been a driver for growth and profits for insurers. However, investors are concerned about the outlier costs associated with these plans, which cover more than half of all Medicare beneficiaries.
CVS booked the turnover of $ 97.71 billion for the fourth quarter, which increased by 4.2% last year before the same period before the previous year, since the pharmacy business and the insurance unit are growing.
The company achieved a net result of 1.64 billion US dollars or $ 1.30 per share in the fourth quarter. This is compared to a net profit of $ 2.05 billion or $ 1.58 per share for the period of previous year.
With the exception of certain objects such as depreciation of intangible assets, restructuring costs and capital losses, the adjusted profits were 1.19 USD per share for the quarter.
According to CVS, the profits in the fourth quarter reflect higher medical costs in its insurance business and the lower Medicare Advantage Star ratings for the 2024 payment year, both of which burdened the operating results of the segment for the quarter. These star ratings help Medicare patients to compare the quality of Medicare's health and drug plans.
However, CVS expects the margins to be improved in his Medicare Advantage business in 2025, partly by reducing his membership in these plans through a “high percentage percentage” from the end of 2024, Joyner said on Wednesday when calling for a profit. He added that the Medicare Advantage Star reviews had improved for the year.
“Our focus remains on compliance with our commitments for our Medicare Advantage members and creates a practical way for suitable margins,” said Joyner.
Companies can choose to prevent patients in markets they find and patients who lose insurance can enroll for a new Medicare advantage plan or join traditional Medicare plans.
Pressure on the insurance
All three business segments of CVS defeated Wall Street expectations for the fourth quarter.
The CVS insurance business booked sales of 32.96 billion US dollars in the quarter, which rose to an increase of more than 23% compared to the fourth quarter of 2023. Analysts expected the unit to take 32.89 billion US dollars for this period according to Street Account.
However, the company reported an adjusted loss of $ 439 million in the fourth quarter compared to an adjusted operating result of USD 676 million in the previous year. This change was due, among other things, to higher medical costs and the Medicare Advantage -Star Reviews of the company.
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The ratio of the insurance unit – a measure of the entire medical expenditure compared to the premiums raised – rose from 88.5% in the previous year to 94.8%. A lower ratio usually indicates that a company has collected more in premiums than was paid out in services, which leads to higher profitability.
The ratio of the fourth quarter was lower than the 95.9%, the analysts expected, according to Street Account.
“The medical trends remain increased, although what we experienced in the fourth quarter was less serious than what we accepted,” said CVS CFO Thomas Cowhey on the call.
The Health Services CVS segment achieved sales of $ 47.02 billion in the quarter, which decreased from more than 4% compared to the same quarter in 2023. According to Street Account, analysts expected sales of 44.06 billion dollars for this period.
This unit includes Caremark, one of the largest pharmaceutical beefic managers in the country. Caremark negotiates drug discounts with manufacturers on behalf of insurance plans and creates lists of medication or form that are covered by insurance and reimburses pharmacies for recipes.
The Department of Health Services of CVS worked on 499.4 million pharmacy claims in the quarter, of 600.8 million in the previous year due to the loss of a unnamed large customer. Tyson Foods In January 2024, CNBC announced that CVS as Pharmacy Benefit Manager dropped for its approximately 140,000 employees. However, it is unclear whether other companies will stop working with CVS during the year.
The department for pharmacy and consumer -wellness department of CVS booked sales of 33.51 billion US dollars in the fourth quarter, which rose to increase more than 7% compared to the same period in the previous year. According to Street Account, analysts expected sales of 33.03 billion US dollars for the quarter.
This unit provides regulations in more than 9,000 retail pharmacies from CVS and offers other pharmacy services such as vaccinations and diagnostic tests.
The increase was partially driven by a higher prescription volume, said CVS. The reimbursement pressure of the pharmacy, the start of new generics and a lower volume from imagination such as pantry food and toilet articles, including a reduced number of shops, loads the device's turnover.
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