CVS earnings: Pharmacy giant cautions on future outlook
CVS (CVS) beat on both earnings and revenue in its second quarter but was cautious about its future outlook as the company puts more emphasis on healthcare services instead of its pharmacy chain.
CFO Shawn Guertin told investors Wednesday the company now expects 2024 adjusted earnings per share to be between $8.50 and $8.75, relatively flat from 2023, compared to a previous estimate of $9 per share. In addition, Guertin said, guidance for $10 in 2025 should also be cut, but more details on that will be provided at the end of this year.
The downward shift in guidance comes amid a number of headwinds facing the company and the health industry broadly, Geurtin said.
These headwinds include uncertainty in Medicare Advantage, which accounts for 50% of its insurance premiums revenue; the potential of a weakening consumer environment; weakened contributions from its COVID business, like vaccine and testing; and plans to accelerate healthcare service growth through the Oak Street Health acquisition.
CEO Karen Lynch told investors during an earnings call that Oak Street Health and Signify Health, both of which were acquired in May, have seen a boost in business.
CVS has been bullish on healthcare services and anticipates the company will change how consumers engage with the broader health system, Lynch said.
The company announced a plan to increase the number of joint CVS pharmacy and Oak Street Health locations next year, with a plan to build 50 to 60 clinics next year and increase their presence from 21 to 25 states.
CVS is also using its pharmacy business, insurance business (formerly Aetna), and Signify patient visits as an opportunity to guide more business to Oak Street Health, Lynch said.
The other parts of the business are being used as an opportunity to identify patients who do not have a dedicated primary care provider and recommend Oak Street to them, Lynch said on the call.
"We have more conviction now that the meaningful value we thought we could unlock will surface over the course of the next couple of years," Lynch said.
Guertin added that the ownership of the two additional assets in the quarter, Signify and Oak Street, has added meaningful growth to the company's business in just one quarter.
In order to manage the expenses for the growth strategy, CVS announced it would lay off 5,000 non-consumer-facing employees, which would result in savings of about $500 million.
The company has also set a goal of realizing $700 million-$800 million in cost savings in 2024, which will be reallocated and invested in health services and technology, Lynch said.
Follow Anjalee Khemlani on Twitter @AnjKhem.
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