CVS beats estimates, hikes guidance as insurance business improves

CVS Health connected Wednesday reported third-quarter net and gross that blew past estimates and raised its adjusted nett outlook, arsenic the institution sees spot successful its security portion and retail pharmacy business. 

The quarterly results headdress David Joyner's archetypal afloat twelvemonth arsenic CEO of the company, which struggled to thrust higher profits and amended its banal show nether its past apical executive, Karen Lynch. Joyner's assertive efforts to crook the flailing drugstore concatenation astir – from enforcement reshuffling to outgo cuts – already look to beryllium paying off. 

The institution present expects fiscal 2025 adjusted net of $6.55 to $6.65 per share, up from erstwhile guidance of $6.30 to $6.40 per share. CVS has present hiked its outlook for 3 consecutive quarters.

"[I] couldn't beryllium much blessed astir the information that this is 3 quarters wherever we've had a bushed and rise and obviously, looking into Q4, we consciousness really, truly bully astir our quality to adjacent retired the twelvemonth favorably," Joyner said successful an interview. 

He pointed to respective factors, including betterment successful Aetna, the company's insurer. Aetna and different insurers person grappled with higher-than-expected aesculapian costs implicit the past twelvemonth arsenic much Medicare Advantage patients instrumentality to hospitals for procedures they delayed during the pandemic.

Joyner besides highlighted a "really bully income season" for its pharmacy payment manager, Caremark, and a $5.7 cardinal goodwill impairment complaint during the 3rd 4th related to the wellness attraction transportation reporting unit, which is nether the company's wellness attraction services segment. 

Here's what CVS reported for the 3rd 4th compared with what Wall Street was expecting, based connected a survey of analysts by LSEG: 

• Earnings per share: $1.60 adjusted vs. $1.37 expected
• Revenue: $102.87 cardinal vs. $98.85 cardinal expected

The institution posted nett nonaccomplishment of $3.99 billion, oregon $3.13 per share, for the 3rd quarter. That compares with nett income of $71 million, oregon 7 cents per share, for the aforesaid play a twelvemonth ago. 

In a release, CVS said the nonaccomplishment reflects the goodwill impairment complaint related to the wellness attraction transportation reporting unit, which has "continued to acquisition challenges which person impacted its quality to turn the concern astatine the complaint antecedently estimated." The institution made respective changes to that segment's absorption squad and finalized strategical changes, including plans to trim the fig of superior attraction clinics it would unfastened successful 2026 and beyond. 

"We've efficaciously made the determination this 4th to some dilatory the session maturation and besides adjacent immoderate of the underperforming clinics," Joyner said. He noted that CVS has announced that it volition adjacent 16 locations of superior attraction supplier Oak Street Health. 

But Joyner said "this does not alteration our views of value-based care," noting that Oak Street Health is "actually performing according to plan." 

Excluding definite items, specified arsenic amortization of intangible assets, restructuring charges and superior losses, adjusted net were $1.60 per stock for the quarter.

CVS booked income of $102.87 cardinal for the 3rd quarter, up 7.8% from the aforesaid play a twelvemonth agone arsenic each 3 of its concern segments grew. Wall Street didn't expect CVS to scope quarterly income of much than $100 cardinal until the 4th quarter, according to StreetAccount estimates. 

All 3 of CVS' concern units bushed Wall Street's gross expectations for the 3rd quarter, with notable improvements successful the security business. 

The security segment's aesculapian payment ratio – a measurement of full aesculapian expenses paid comparative to premiums collected – decreased to 92.8% from 95.2 % a twelvemonth earlier. A little ratio typically indicates that a institution collected much successful premiums than it paid retired successful benefits, resulting successful higher profitability.

That ratio is somewhat higher than the 92.4% that analysts had expected, according to StreetAccount.

CVS said that was driven by the "favorable year-over-year interaction of premium deficiency reserves recorded arsenic wellness attraction costs" and improved underlying show successful the security unit's authorities business, among different factors. Premium deficiency reserves refers to a liability that an insurer whitethorn request to screen if aboriginal premiums are not capable to wage for anticipated claims and expenses.

The security concern booked $35.99 cardinal successful gross during the quarter, up much than 9% from the 3rd 4th of 2024. Analysts expected the portion to instrumentality successful $34.48 cardinal for the period, according to estimates from StreetAccount.

CVS said that maturation was driven by increases successful the authorities business, mostly owed to the interaction of the Inflation Reduction Act connected the Medicare Part D program. 

CVS' pharmacy and user wellness part posted $36.21 cardinal successful income for the 3rd quarter, up 11.7% from the aforesaid play a twelvemonth earlier.

CVS said the summation came partially from higher medicine volume, including from the company's acquisition of prescriptions from Rite Aid, but offset by pharmacy reimbursement pressure. Analysts expected income of $35.6 cardinal for the quarter, StreetAccount said.

That portion dispenses prescriptions successful CVS' much than 9,000 retail pharmacies and provides different pharmacy services, specified arsenic vaccinations and diagnostic testing.

CVS' wellness services conception generated $49.27 cardinal successful gross for the quarter, up 11.6% compared with the aforesaid 4th successful 2024. Analysts expected the portion to station $45.71 cardinal successful income for the period, according to StreetAccount.

That portion includes Caremark, which negotiates cause discounts with manufacturers connected behalf of security plans and creates lists of medications, oregon formularies, that are covered by security and reimburses pharmacies for prescriptions.

— CNBC's Bertha Coombs contributed to this report