CVS Health exceeded both revenue and profit expectations for the fourth quarter, even as its insurance business continued to grapple with rising medical costs. The company also provided a 2025 profit outlook in line with Wall Street forecasts.
CVS Health reported fourth-quarter revenue and profit that exceeded expectations, despite its insurance business facing higher medical costs . The company also provided a full-year 2025 adjusted profit outlook of $5.75 to $6.00 per share, aligning with Wall Street's projections. This marks the first complete quarter under David Joyner , a seasoned CVS executive, as CEO of the struggling retail drugstore chain.
Joyner assumed the role from Karen Lynch in mid-October, as CVS strived to enhance profitability and improve its stock performance. The company has been grappling with escalating costs within its insurance unit, Aetna, and a retail pharmacy business pressured by subdued consumer spending and reduced reimbursements for prescription drugs. CVS has announced plans for cost-cutting measures over the coming years. Medical costs have surged over the past year as more Medicare Advantage patients return to hospitals for procedures postponed during the pandemic. Medicare Advantage, a privately operated health insurance plan contracted by Medicare, has long been a key driver of growth and profits for insurers. However, investors have expressed concerns about the escalating costs associated with these plans, which cover over half of all Medicare beneficiaries. CVS reported sales of $97.19 billion for the fourth quarter, a 4.2% increase compared to the same period last year, attributed to growth in both its pharmacy business and insurance unit. The company recorded a net income of $1.64 billion, or $1.30 per share, for the fourth quarter. This compares to a net income of $2.05 billion, or $1.58 per share, during the previous year's corresponding 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 stated that its fourth-quarter earnings reflect higher medical costs within its insurance business and lower Medicare Advantage star ratings for the 2024 payment year, both of which negatively impacted the segment's operating results for the quarter. These star ratings assist Medicare patients in comparing the quality of Medicare health and drug plans. All three of CVS' business segments surpassed Wall Street's expectations for the fourth quarter. CVS' insurance business generated $32.96 billion in revenue during the quarter, a surge of over 23% from the fourth quarter of 2022. Analysts anticipated the unit to generate $32.89 billion for the period, according to estimates from StreetAccount. However, 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. This shift 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 fell short of the 95.9% analysts were expecting, according to StreetAccount estimates. CVS' health services segment generated $47.02 billion in revenue for the quarter, a decline of over 4% compared to the same quarter in 2022. Analysts projected the unit to post $44.06 billion in sales for the period, according to StreetAccount. This unit encompasses Caremark, one of the nation's largest pharmacy benefit 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's 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. While the specific client was not disclosed, it's known that CVS lost the contract to serve as the pharmacy benefit manager for its roughly 140,000 employees. However, it's unclear if any other companies ceased 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, an increase of more than 7% from the same period a year earlier. Analysts projected sales of $33.03 billion for the quarter, StreetAccount said. This unit dispenses prescriptions at CVS' more than 9,000 retail pharmacies and provides other pharmacy services, such as vaccinations and diagnostic testing. The increase was partly attributed to higher prescription volume, CVS stated
CVS Health Earnings Insurance Medical Costs Retail Pharmacy David Joyner Medicare Advantage
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