CVS Health (NYSE:CVS) reported a decline in first-quarter profits and slashed its full-year earnings outlook, sending shares down more than 11% premarket as both earnings and revenue fell short of Wall Street expectations. The healthcare giant posted adjusted earnings per share (EPS) of $1.33 for the quarter, which was significantly below the analysts’ consensus of $1.71. Revenue for the quarter was $88.4 billion, also missing the consensus estimate of $89.33 billion.
CEO Commentary
“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. We remain committed to our strategy and believe that we have the right assets in place to deliver value to our customers, members, patients, and shareholders.” -Karen S. Lynch, CVS Health President and CEO
First quarter revenues of $88.4 billion increased by 3.7% compared to the prior year, reflecting strong growth in the Health Care Benefits and Pharmacy & Consumer Wellness segments, partially offset by a decline in our Health Services segment.
CVS Health’s President and CEO, Karen S. Lynch, commented on the results, stating, “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.” She emphasized the company’s commitment to its strategy and belief in its assets to deliver value despite near-term pressures.
- Total revenues increased 3.7% primarily driven by growth in the Health Care Benefits and Pharmacy & Consumer Wellness segments, partially offset by a decline in the Health Services segment.
- Operating income decreased 34.1% primarily due to the decrease in adjusted operating income described below, partially offset by the absence of a $349 million loss on assets held for sale related to the write-down of the Company’s Omnicare® long-term care business (“LTC business”) recorded in the prior year.
- Adjusted operating income decreased 32.3% primarily driven by declines in the Health Care Benefits and Health Services segments, partially offset by an increase in the Pharmacy & Consumer Wellness segment. See pages 3 through 5 for additional discussion of the adjusted operating income performance of the Company’s segments.
- Interest expense increased $127 million, or 21.6%, due to higher debt in the three months ended March 31, 2024, primarily driven by long-term debt issued in February and June of 2023 to fund the Company’s acquisitions of Signify Health, Inc. (“Signify Health”) and Oak Street Health, Inc. (“Oak Street Health”).
- The effective income tax rate increased to 28.9% compared to 25.6% primarily due to the impact of certain discrete tax items and their proportion to lower pre-tax income recorded during the three months ended March 31, 2024.
The stock’s significant drop following the earnings release indicates investor concerns over the company’s revised earnings forecast and current quarter performance. CVS Health’s guidance adjustment and the first-quarter results have set a cautious tone for the company’s financial outlook for the remainder of the year. That’s a great benefit for CVS store