CVS Health Stock Plunges Following Disappointing Q1 Earnings Report

Shares of CVS Health Corp took a nosedive in premarket trading after the company reported lower-than-expected first-quarter earnings, signaling challenges in its health services and Medicare divisions. The stock plummeted 11.2% before the market opened, marking its lowest level since November 2020 and potentially the largest single-day drop since the onset of the pandemic.

The company’s net income fell to $1.11 billion, or 88 cents a share, missing analysts’ expectations. Adjusted earnings per share of $1.31 also failed to meet the FactSet consensus of $1.69. Meanwhile, revenue in the first quarter rose 3.7% to $88.44 billion, falling short of the projected $89.33 billion.

In detail, health services revenue at CVS dropped 9.7% to $40.29 billion due to the loss of a major client and ongoing declines in pharmacy client prices. The adjusted operating profit for this segment declined by 18.9% to $1.36 billion, with pharmacy claims processed decreasing by 21.2% to 462.9 million.

On the other hand, revenue from healthcare benefits saw a 24.6% increase to $32.24 billion, surpassing expectations. However, adjusted operating income for this division plummeted by 59.9%, primarily due to rising Medicare utilization and a decrease in the company’s Medicare Advantage star ratings.

CVS CEO Karen Lynch assured stakeholders that the company is actively addressing the challenges faced in the Medicare Advantage sector. The company noted a rise in the medical-benefit ratio to 90.4% from 84.6%, with a 5.1% increase in medical membership to 26.8 million.

In the pharmacy and consumer-wellness segment, revenue grew by 2.9% to $28.73 billion, driven by increased prescription volume, including a boost from vaccinations. Adjusted operating income also saw a 3.8% rise to $1.18 billion, with prescriptions filled growing by 3.2% to 417.6 million.

For the full year 2024, CVS revised its adjusted EPS outlook to ‘at least $7.00,’ down from the previous guidance of ‘at least $8.30.’ The stock has experienced a 14.3% decline year-to-date, while the S&P 500 index has seen a 5.6% increase over the same period.

This information was sourced from MarketWatch, a subsidiary of Dow Jones & Co., independent of Dow Jones Newswires and The Wall Street Journal.