CVS Health (CVS, Financial) reported fourth-quarter profits that surpassed Wall Street expectations, driven by its Aetna insurance subsidiary and pharmacy network operations. The company's revenue for the quarter was $97.7 billion, marking a 4% year-over-year increase and exceeding expectations by $830 million. The healthcare benefits segment contributed approximately $32.9 billion, a 23% increase from the previous year.
Adjusted earnings per share for the quarter were $1.19, beating the analyst consensus of $0.92. Following the earnings release, CVS shares saw an 11% pre-market surge. The company's profit growth was bolstered by lower-than-expected costs in the Aetna insurance segment, as the ratio of premiums spent on medical expenses was below analyst predictions. CVS had also accounted for some anticipated fourth-quarter losses in the third quarter.
CVS is striving to turn around its struggling pharmacy chain and Aetna insurance business, both impacted by low pricing strategies and downgraded quality ratings, which affect U.S. healthcare plan payments. CEO David Joyner, who took office in October, stated that recovery would take several years.
In the insurance segment, CVS allocated 94.8% of premium revenue to healthcare, below analyst expectations. Investors favor lower figures. However, CVS noted that high utilization of medical services continues to pressure the business. The company highlighted the high costs of managing Medicaid patient care, as states have reduced Medicaid enrollments, often retaining sicker patients.
CVS projects adjusted earnings per share of $5.75 to $6 for 2025, aligning with the analyst average expectation of $6. Activist investor Glenview Capital Management, with CEO Larry Robbins (Trades, Portfolio) as a new board member, is advocating for debt reduction.
