CVS Health posted first-quarter results early Wednesday that badly missed estimates, dragged down by "utilization pressure in the company's Medicare business." CVS stock, a laggard since the middle of last decade, tumbled to a three-year low in early stock market action.
CVS also sharply cut its full-year outlook on the expectation that cost pressures could continue. That pessimistic view weighed a bit on shares of other managed care players including UnitedHealth Group and Humana.
CVS Earnings
Results: CVS reported adjusted EPS of $1.31, down 40% from a year ago and 38 cents below consensus. Revenue rose 3.7% to $88.4 billion, slightly missing views.
Medical membership rose by 1.1 million over the prior three months to 26.8 million, as gains in Medicare and commercial coverage more than offset Medicaid losses.
But CVS said its medical benefits ratio, or costs as a percentage of premiums, jumped to 90.4% in the quarter from 84.6% a year ago. The spike in costs wasn't entirely due to higher utilization. CVS said results also reflected its 2024 Medicare Advantage stars ratings, a measure released by the government to help customers judge quality. An extra day for the leap year also contributed.
Outlook: CVS cuts its outlook for full-year adjusted EPS to "at least $7" from "at least $8.30." Full year cash flow is now seen exceeding $10.5 billion vs. the prior outlook above $12 billion. New guidance builds in an assumption that "the majority of utilization pressure" seen in Q1 will persist throughout 2024.
CVS Stock
CVS sank 11.9% to 59.66 early Wednesday. That's the lowest since November 2020. Meanwhile, UNH dipped 1.2% and Humana 0.75%. HUM stock is right at four-year lows.
