CVS Health will put profit estimates at the top as new CEOs pursue a transformation. Stock Surge
By Amina Niasse and Sriparna Roy
(Reuters) – CVS Health broke Wall Street estimates for fourth quarter profits on Wednesday, providing an annual forecast suggesting improved performance in the first quarter under new CEO David Joyner.
The results eased the fears of investors, sending stocks over 15% in early trading. They beat more than 40% last year as they missed revenue targets for the first three quarters of 2024 and later pulled forecasts.
Like its peers, healthcare conglomerates face rising costs across Medicare plans for people over the age of 65 or older or disabled. However, the impact of CVS was more pronounced as CVS registered the most new members under the plan.
CVS expects annual profits of between $5.75 and $6.00 per share. Analysts were on average expecting $5.96 per share, according to data compiled by LSEG.
“We have strong momentum towards 2025, with the right assets, the right leadership and the right strategies in place,” Joyner told analysts in a call.
The outlook is probably conservative and beat, James Harlow, senior vice president of No Barre Capital Management, said it will cut it after the company has given its optimistic outlook over the past few years.
The company’s medical loss rate, or the percentage of premiums spent on patient care, deteriorated from 88.5% in the same period last year to 94.8%, improving from the record 95.2% in the last quarter.
Analysts expected the company to report a loss rate of 95.46%, according to consensus estimates compiled by Brakerage Deutsche Bank. The company believes the 2025 ratio is 91.5% low-end.
“What we experienced in the fourth quarter was less severe than what we expected, but healthcare trends remained rising,” Chief Financial Officer Thomas Cowhey said in a call. Ta.
Insurers typically aim to reach around 80% of premiums collected to be spent on claims, but in recent quarters CVS and rivals have experienced a higher range.
The result is a “solid first step in the right direction,” said Baird analyst Michael Ha, who needs some more positive performance in 2025 to get comfort He added that.
The pharmacy supports it
CVS submitted a cost reduction plan in November and appointed a new insurance manager as part of Joiner’s efforts to turn the company around.
The company’s Healthcare Benefits Force recorded a quarterly loss of $439 million compared to its $676 million profit the previous year.