Within record health costs, it focuses on CVS Health’s transformation efforts

By Sriparna Roy

(Reuters) – CVS health investors are delving into a rigorous investigation of their meticulous initiative this week, led by new CEO David Joyner, which led the impact on Health Insurance Business’s cost pressure.

Reporting its fourth quarter results on Wednesday, the healthcare conglomerate missed its earnings target for the last three quarters, withdrew its annual forecast, and its stock fell over 40% in 2024.

“Unfortunately, we believe that every line is gradually becoming more difficult for CVS,” said George Hill, an analyst at Deutsche Bank.

CVS owns pharmacy benefits managers, large insurance units, and one of the largest retail pharmacy chains in the United States.

Challenges with higher costs will likely continue and accelerate, according to Leerink Partners analyst Michael Cherny.

CVS, like its peers, faces rising costs across Medicare plans for people over 65, but the hit was more prominent as the company registered the most new members under the plan .

In October, the company reported a record high in medical loss rates (percentage of premiums spent on medical care).

But investors are now hoping for change.

CVS, which has been remodeled by Top Management since Joiner’s appointment in October, cut its major cost-cutting plans in November.

Management reliability

Investors are looking for comments on 2025 forecasts, looking for trends in healthcare demand, adjustments to Medicaid rates, annual registrations, and pharmacy business performance.

In the past few years, CVS has reduced its annual forecast several times after issuing the optimal target, according to James Harlow, senior vice president of Novare Capital Management.

Analysts are predicting 2025 earnings of $5.96 per share on average, according to data compiled by LSEG.

Peers UnitedHealth and Elevance have warned that costs will continue to rise in 2025.

“I don’t think the bar is that expensive, but people just want to see it’s not worse than what they originally expected,” said Jeffries analyst Brian Tankiroot.

(Reporting by Sriparna Roy in Bengali, edited by Shinjini Ganguli)