CVS Health reports Q1 results, revises full-year 2024 guidance

CVS Health today announced operating results for the three months ended March 31, 2024.

The company's first quarter revenues were $88.4 billion an increase of 3.7% compared to the prior year, reflecting strong growth in the health care benefits and pharmacy & consumer wellness segments. The growth was partially offset by a decline in the health services segment, the company said.

The Woonsocket, R.I.-based company reported GAAP diluted EPS of 88 cents in the quarter decreased from $1.65 in the prior year and adjusted EPS of $1.31 decreased from $2.20 in the prior year, primarily due to a decline in the health care benefits segment's operating results, reflecting utilization pressure in the company's Medicare business.

Recognizing the potential for continued elevated medical cost trends in the remainder of 2024, the company revised its full-year 2024 GAAP diluted EPS, Adjusted EPS and cash flow from operations guidance to reflect the assumption that the majority of this pressure will persist throughout 2024.

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“The current environment does not diminish our opportunities, enthusiasm, or the long-term earnings power of our company. We are confident we have a pathway to address our near-term Medicare Advantage challenges. We remain committed to our strategy and believe that we have the right assets in place to deliver value to our customers, members, patients, and shareholders," said Karen Lynch, president and CEO of CVS Health.

For the three months ended March 31, 2024 compared to the prior year total revenues increased 3.7% primarily driven by growth in the health care benefits and pharmacy & consumer wellness segments. The growth was partially offset by a decline in the health services segment, the company said.

The retailer's operating income decreased 34.1% primarily due to the decrease in adjusted operating income. The decrease was partially offset by the absence of a $349 million loss on assets held for sale related to the write-down of the company's Omnicare long-term care business recorded in the prior year, CVS Health said.

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The company's adjusted operating income decreased 32.3% primarily driven by declines in the health care benefits and health services segments. The decrease was partially offset by an increase in the pharmacy & consumer wellness segment, CVS Health said.                     

The health care benefits segment's total revenues increased 24.6% for the quarter, compared to the prior year driven by growth in the Medicare and Commercial product lines.

The health care benefits segment's adjusted operating income decreased 59.9% for the quarter compared to the prior year primarily driven by increased Medicare utilization, the unfavorable impact of the previously disclosed decline in the company's 2024 Medicare Advantage star ratings, as well as an unfavorable year-over-year impact of prior-year development. These decreases were partially offset by increased volume due to growth in the Medicare and Commercial product lines, an increase in net investment income and improved fixed cost leverage across the business due to membership growth, the company said.

Medical membership as of March 31, 2024 of 26.8 million increased 1.1 million members compared with Dec. 31, 2023, reflecting increases in the Medicare and Commercial product lines, including an increase of 493,000 members related to the individual exchange business within the commercial product line. These increases were partially offset by a decline in the Medicaid product line. the company said.

The health services segment's total revenues decreased 9.7% for the quarter compared to the prior year primarily driven by the previously announced loss of a large client during the quarter and continued pharmacy client price improvements. These decreases were partially offset by pharmacy drug mix, growth in specialty pharmacy and the acquisitions of Oak Street Health and Signify Health, CVS Health noted.

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The health services segments' adjusted operating income decreased 18.9% for the quarter compared to the prior year primarily driven by continued pharmacy client price improvements, lower contributions from 340B, the previously announced loss of a large client during the three months ended March 31, 2024 and the inclusion of the Oak Street Health operating results in the quarter. These decreases were partially offset by improved purchasing economics, including increased contributions from the products and services of the company's group purchasing organization, as well as contributions from Signify Health in the quarter, CVS Health said.

Pharmacy claims processed decreased 21.2% on a 30-day equivalent basis for the quarter compared to the prior year, reflecting the previously announced loss of a large client during the three months ended March 31, 2024.

Total revenues for the quarter in the pharmacy & consumer wellness segment increased 2.9% compared to the prior year primarily driven by increased prescription volume, including increased contributions from vaccinations, as well as pharmacy drug mix. These increases were partially offset by the impact of recent generic introductions, continued pharmacy reimbursement pressure and decreased front store volume, reflecting the impact of a decrease in store count and lower contributions from COVID-19 over-the-counter test kits, the company said.

The pharmacy & consumer wellness segment's adjusted operating income increased 3.8% for the quarter, compared to the prior year primarily driven by increased prescription volume, including increased contributions from vaccinations, improved drug purchasing and decreased operating expenses, including the favorable impact of the decrease in store count, during the quarter. These increases were partially offset by continued pharmacy reimbursement pressure, the retailer said.

Prescriptions filled increased 3.2% on a 30-day equivalent basis for the three months ended March 31, 2024 compared to the prior year primarily driven by increased utilization.

The company revised its full-year 2024 GAAP diluted EPS guidance to at least $5.64 from at least $7.06 and its full-year 2024 adjusted EPS guidance to at least $7.00 from at least $8.30. The company also revised its full-year 2024 cash flow from operations guidance to at least $10.5 billion from at least $12 billion.

CVS Health's guidance revision reflects the assumption that the majority of utilization pressure observed in the health care benefits segment during the first quarter will persist throughout 2024.