Wall Street analysts were caught off guard by CVS Health’s disappointing first-quarter earnings, which fell short of expectations and caused the company to lower its 2024 outlook. The primary reason for the miss was rising costs from care use in the Medicare Advantage business, which has been a significant challenge for the health care giant.
In response to the disappointing results, CVS Health revised its adjusted earnings expectations to at least $7 per share, down from its previous forecast of at least $8.30. This was a significant reduction that cast doubt on the company’s ability to achieve its previously stated target of double-digit growth in earnings per share next year. In the first quarter, CVS Health reported adjusted earnings of $1.31 per share on total revenue of $88.4 billion, missing analysts’ estimates of $1.69 per share on $89.33 billion in revenue.
The news caused shares of CVS Health to plummet, with its stock price dropping 11% to $60 in premarket trading due to the disappointing results. Analysts are now reevaluating their forecasts for the company and considering whether it is still able to achieve its long-term growth goals given these challenges in the Medicare Advantage business.
CVS Health Corp., which operates a major drugstore chain, a pharmacy benefit management business, and sells health insurance through its Aetna arm, has been grappling with rising costs from care use in its Medicare Advantage business for some time now. The company has been trying to mitigate these costs through various measures such as increasing premiums and reducing benefits but has not been successful in completely offsetting them yet.
