CVS Health on Wednesday reported third-quarter revenue and earnings that surpassed analyst expectations and raised its full-year profit forecast, citing improved performance in its Aetna insurance division.
Despite the strong operational results, the company posted a net loss for the quarter, driving shares down more than 3% in premarket trading. The loss reflects a $5.7 billion goodwill impairment charge tied to its health care services segment.
The report concludes the first full year for CEO David Joyner, who has implemented aggressive turnaround efforts, including executive changes and cost-cutting measures. These initiatives appear to be succeeding, with CVS shares up more than 85% for the year.
The company now anticipates full-year adjusted earnings between $6.55 and $6.65 per share, an increase from its previous guidance of $6.30 to $6.40. This marks the third consecutive quarter CVS has boosted its profit outlook.
For the third quarter, CVS reported:
- Adjusted Earnings Per Share: $1.60, versus $1.37 expected by LSEG.
- Revenue: $102.87 billion, versus $98.85 billion expected.
The company’s net loss was $3.99 billion, or $3.13 per share, a sharp contrast to the $71 million in net income reported in the same period a year ago. CVS attributed the loss to the impairment charge on its health care delivery unit, which has faced challenges in its growth projections. As a result, the company has revised its strategy, slowing the planned rollout of new primary care clinics and closing 16 underperforming Oak Street Health locations.
Joyner affirmed that the decision “does not change our views of value-based care,” noting that Oak Street Health is otherwise “performing according to plan.” He credited the quarter’s strong performance to the recovery at Aetna and a successful sales season for its pharmacy benefit manager, Caremark.
Insurers like Aetna have been grappling with elevated medical costs as more Medicare Advantage patients undergo procedures delayed during the pandemic. However, the company is demonstrating an improved ability to manage these expenses.
All three of CVS’s business segments beat Wall Street’s revenue expectations. The insurance unit’s medical benefit ratio—a key metric of medical expenses relative to premiums—improved to 92.8% from 95.2% a year earlier. The segment generated $35.99 billion in revenue, up more than 9%, driven by growth in its government business, including Medicare Part D plans.
The pharmacy and consumer wellness division posted sales of $36.21 billion, an 11.7% increase from the prior-year period, boosted by higher prescription volume. The health services segment, which includes Caremark, saw revenue climb 11.6% to $49.27 billion.
