CVS Health Surges 10% After Beating Q4 Earnings Estimates Despite Insurance Woes
CVS Health (NYSE: CVS) posted stronger-than-expected fourth-quarter earnings, sending its stock soaring 10% in premarket trading. While revenue outpaced Wall Street estimates, ongoing struggles in its Aetna insurance unit remained a focal point for investors.
CVS Q4 Financial Highlights
– Revenue: $97.71 billion (vs. $97.19 billion expected)
– Adjusted EPS: $1.19 (vs. $0.93 expected)
– Net Income: $1.64 billion, down from $2.05 billion a year earlier
– Stock Performance: Up 10% in premarket trading
The results mark a critical moment for CEO David Joyner, who took over in October and is spearheading a $2 billion cost-cutting plan to address rising healthcare expenses and declining reimbursement rates.
Insurance Unit Struggles Amid Rising Medical Costs
Despite revenue growth, CVS’ Aetna insurance division reported a $439 million operating loss, compared to a $676 million profit in the same period last year. The key issue? Higher medical costs, particularly in Medicare Advantage, where enrollees resumed delayed procedures.
– Medical benefit ratio: 94.8% (vs. 88.5% last year, but better than the 95.9% analysts expected)
– Aetna revenue: $32.96 billion, up 23% year-over-year
With Medicare Advantage now covering more than half of all Medicare beneficiaries, cost pressures in this segment remain a top concern.
Pharmacy & Health Services Growth
CVS’ pharmacy and wellness division reported $33.51 billion in sales, a 7.5% increase year-over-year, driven by higher prescription volumes. Meanwhile, its Caremark pharmacy benefit management (PBM) unit saw revenue slip to $47.02 billion from $49.15 billion, impacted by losing a major client.
Looking Ahead: 2025 Guidance & Stock Outlook
– 2025 adjusted EPS forecast: $5.75 to $6.00 per share (aligned with analysts’ expectations)
– No revenue outlook provided, leaving some uncertainty about CVS’ growth trajectory
Following a 40% stock decline in 2024, CVS is under pressure to stabilize operations and regain investor confidence. While its Q4 earnings beat offers short-term optimism, challenges in the insurance segment and shifting healthcare trends will dictate its long-term performance.
