An exterior view of a CVS pharmacy in Danville, Pennsylvania.
Paul Weaver | Lightrocket | Getty Images
CVS Health on Wednesday reported fourth-quarter revenue and profit that topped estimates, even as its troubled insurance business continued to see higher medical costs.
The company also issued a full-year 2025 adjusted earnings outlook of $5.75 to $6 per share, which was in line with Wall Street’s expectations. But CVS did not provide a revenue forecast for the year.
It caps off the first full quarter with David Joyner, a longtime CVS executive, as CEO of the troubled retail drugstore chain. Joyner succeeded Karen Lynch in mid-October, as CVS struggled to drive higher profits and improve its stock performance.
The company underwent a management reshuffle as part of a broader turnaround plan that includes $2 billion in cost cuts over the next several years. CVS has grappled with rising costs in its insurance unit, Aetna, and a retail pharmacy business pressured by softer consumer spending and lower reimbursements for prescription drugs.
Here’s what CVS reported for the fourth quarter compared with what Wall Street was expecting, based on a survey of analysts by LSEG:
- Earnings per share: $1.19 per share adjusted vs. 93 cents per share expected
- Revenue: $97.71 billion vs. $97.19 billion expected
Shares rose more than 6% in premarket trading.
CVS and other insurers such as UnitedHealth Group and Humana have seen medical costs spike over the last year as more Medicare Advantage patients return to hospitals for procedures they delayed during the pandemic.
Medicare Advantage, a privately run health insurance plan contracted by Medicare, has long been a driver of growth and profits for insurers. But investors have become concerned about the runaway costs tied to those plans, which cover more than half of all Medicare beneficiaries.
CVS booked sales of $97.19 billion for the fourth quarter, up 4.2% from the same period a year ago due to growth in its pharmacy business and insurance unit.
The company posted net income of $1.64 billion, or $1.30 per share, for the fourth quarter. That compares with net income of $2.05 billion, or $1.58 per share, for the year-earlier period.
Excluding certain items, such as amortization of intangible assets, restructuring charges and capital losses, adjusted earnings were $1.19 per share for the quarter.
CVS said its fourth-quarter earnings reflect higher medical costs in its insurance business and lower Medicare Advantage star ratings for the 2024 payment year, both of which weighed on the segment’s operating results for the quarter. Those star ratings help Medicare patients compare the quality of Medicare health and drug plans.
Pressure on insurance unit
All three of CVS’ business segments beat Wall Street’s expectations for the fourth quarter.
CVS’ insurance business booked $32.96 billion in revenue during the quarter, up more than 23% from the fourth quarter of 2023. Analysts expected the unit to rake in $32.89 billion for the period, according to estimates from StreetAccount.
But the business reported an adjusted operating loss of $439 million for the fourth quarter, compared to an adjusted operating income of $676 million in the year-earlier period. That change was driven by higher medical costs and the company’s Medicare Advantage star ratings, among other factors.
The insurance unit’s medical benefit ratio — a measure of total medical expenses paid relative to premiums collected — increased to 94.8% from 88.5% a year earlier. A lower ratio typically indicates that a company collected more in premiums than it paid out in benefits, resulting in higher profitability.
The fourth-quarter ratio was lower than the 95.9% that analysts were expecting, StreetAccount estimates said.
CVS’ health services segment generated $47.02 billion in revenue for the quarter, down more than 4% compared with the same quarter in 2023. Analysts expected the unit to post $44.06 billion in sales for the period, according to StreetAccount.
That unit includes Caremark, one of the nation’s largest pharmacy benefits managers. Caremark negotiates drug discounts with manufacturers on behalf of insurance plans and creates lists of medications, or formularies, that are covered by insurance and reimburses pharmacies for prescriptions.
CVS’ health services division processed 499.4 million pharmacy claims during the quarter, down from 600.8 million during the year-ago period due to the loss of an unnamed large client. Tyson Foods told CNBC in January 2024 that it dropped CVS as the pharmacy benefit manager for its roughly 140,000 employees, but it is unclear if any other companies stopped working with CVS during the year, as well.
CVS’s pharmacy and consumer wellness division booked $33.51 billion in sales for the fourth quarter, up more than 7% from the same period a year earlier. Analysts expected sales of $33.03 billion for the quarter, StreetAccount said.
That unit dispenses prescriptions in CVS’ more than 9,000 retail pharmacies and provides other pharmacy services, such as vaccinations and diagnostic testing.
The increase was partly driven by higher prescription volume, CVS said. Pharmacy reimbursement pressure, the launch of new generic drugs and lower volume from front-of-store items like pantry food and toiletries, including from decreased store count, weighed on the unit’s sales.
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