CVS Health surpassed Wall Street’s profit expectations despite challenges from rising costs in its insurance division. The company reported earnings of $1.64 billion, or $1.30 per share, for the quarter ending December 31, compared to $2.05 billion, or $1.58 per share, in the same period the previous year.
Excluding one-time costs and benefits, CVS posted earnings of $1.19 per share, significantly outpacing analysts’ expectations of $0.89 per share, according to Zacks Investment Research. Shares of CVS surged more than 11% in pre-market trading on Wednesday following the announcement.
While the company’s profit exceeded estimates, it was lower than the previous year’s figures. CVS attributed the decline to higher medical costs in its insurance division and reduced Medicare Advantage star ratings for the 2024 payment year. The company continues to manage nearly 27 million people through its Aetna insurance arm.
In addition to its health insurance operations, CVS operates one of the nation’s largest drugstore chains and a significant pharmacy benefit management business. However, it has faced challenges in its Medicaid coverage and the rising costs associated with its Medicare Advantage business, which primarily serves people aged 65 and older.
CVS is also undergoing a multi-year restructuring plan that includes the closure of over 1,100 stores as part of its efforts to streamline operations. For the fourth quarter, CVS generated $97.71 billion in revenue, exceeding analysts’ expectations of $97.06 billion.
Looking forward, CVS expects full-year adjusted earnings in the range of $5.75 to $6 per share, while analysts anticipate earnings of $5.86 per share.
CVS Health’s financial struggles in 2024 included multiple forecast cuts, which led to a 43% decline in the company’s stock price. In response, former CEO Karen Lynch stepped down in October, with David Joyner, an executive from within the company, taking over. Additionally, CVS added four new board members, including the CEO of Glenview Capital Management, a hedge fund that has criticized the company for not fully realizing its potential. Glenview holds approximately 1% of CVS’s outstanding shares.
