CVS Health on Thursday reported second-quarter earnings and revenue that topped estimates and raised its adjusted profit outlook, because it sees strength in its retail pharmacy business and a few improvement in its insurance unit.Â
Shares of the retail drugstore chain jumped greater than 1% on Thursday.
The corporate now expects fiscal 2025 adjusted earnings of $6.30 to $6.40 per share, up from previous guidance of $6 to $6.20 per share. CVS also cut its GAAP earnings guidance, without disclosing additional details.
In an interview, CVS CEO David Joyner said the quarterly beat and guidance hike is partly “a tribute to the work and the trouble underway inside Aetna,” the corporate’s insurer. He was referring to a “multiyear recovery effort” at Aetna, which has been grappling with higher medical costs in privately run Medicare plans like the remaining of the insurance industry.Â
Joyner added that CVS’ retail pharmacy business is “performing very well,” demonstrating the corporate’s efforts to introduce latest technology that improves pharmacy operations and drives efficiency. He also pointed to the corporate’s investments in labor and its latest prescription drug pricing model, which has benefited payers and “separated the pharmacy from the pack.”Â
But the corporate’s release said the strength in those two business units was offset by a decline in its health services segment.Â
The outcomes cap off the third full quarter with Joyner, a longtime CVS executive, as chief executive of the retail drugstore chain. Joyner succeeded Karen Lynch in mid-October, as CVS struggled to drive higher profits and improve its stock performance.
Here’s what CVS reported for the second quarter compared with what Wall Street was expecting, based on a survey of analysts by LSEG:Â
- Earnings per share: $1.81 adjusted vs. $1.46 per share expected
- Revenue: $98.92 billion vs. $94.50 billion expected
The corporate posted net income of $1.02 billion, or 80 cents per share, for the second quarter. That compares with net income of $1.77 billion, or $1.41 per share, for the year-earlier period.Â
Excluding certain items, reminiscent of amortization of intangible assets, restructuring charges and capital losses, adjusted earnings were $1.81 per share for the quarter.
CVS booked sales of $98.92 billion for the second quarter, up 8.4% from the identical period a yr ago resulting from growth across all three of its business segments.Â
As a part of a broader turnaround plan, the corporate is pursuing $2 billion in cost cuts over the following several years. Joyner told CNBC that the corporate still has to shut a couple of more locations as a part of reaching that concentrate on.Â
But he said CVS can be “specializing in being in the appropriate geography,” noting that the corporate remains to be buying stores within the Pacific Northwest since it doesn’t have an enormous footprint there.
Pressure in insurance unit
All three of CVS’ business segments beat Wall Street’s revenue expectations for the second quarter. But the corporate’s insurance unit remains to be under pressure.
Aetna and other insurers have grappled with higher-than-expected medical costs during the last yr as more Medicare Advantage patients return to hospitals for procedures they delayed in the course of the pandemic.
The insurance unit’s medical profit ratio – a measure of total medical expenses paid relative to premiums collected – increased to 89.9% from 89.6% a yr earlier. A lower ratio typically indicates that an organization collected more in premiums than it paid out in advantages, leading to higher profitability.
The corporate said that the rise was driven by a charge of $471 million from a so-called premium deficiency reserve, which is expounded to anticipated losses within the 2025 coverage yr. That refers to a liability that an insurer might have to cover if future premiums will not be enough to pay for anticipated claims and expenses.
The second-quarter ratio was lower than the 90.6% that analysts were expecting, based on StreetAccount estimates.
The insurance business booked $36.26 billion in revenue in the course of the quarter, up greater than 11% from the second quarter of 2024. Analysts expected the unit to absorb $34.59 billion for the period, based on estimates from StreetAccount.
CVS’ pharmacy and consumer wellness division booked $33.58 billion in sales for the second quarter, up greater than 12% from the identical period a yr earlier. The corporate said the rise was partly driven by higher volume on the pharmacy and the front of store, but offset by pharmacy reimbursement pressure.
Analysts expected sales of $31.98 billion for the quarter, StreetAccount said.
That unit dispenses prescriptions in CVS’ greater than 9,000 retail pharmacies and provides other pharmacy services, reminiscent of vaccinations and diagnostic testing.
CVS’ health services segment generated $46.45 billion in revenue for the quarter, up greater than 10% compared with the identical quarter in 2024. Analysts expected the unit to post $43.37 billion in sales for the period, based on StreetAccount.
That unit includes Caremark, one in every of the nation’s largest pharmacy profit managers. Caremark negotiates drug discounts with manufacturers on behalf of insurance coverage and creates lists of medicines, or formularies, which are covered by insurance and reimburses pharmacies for prescriptions.
