CVS Health (NYSE:CVS) reported second-quarter earnings that beat analyst expectations, but shares fell by more than 2% as the company cut its full-year guidance, citing continued pressure in its Health Care Benefits segment.
The healthcare giant reported adjusted earnings per share (EPS) of $1.83 for Q2, surpassing the analyst estimate of $1.73. However, revenue came in at $91.2 billion, slightly below the consensus estimate of $91.43 billion, though it represented a 2.6% increase YoY.
CVS Health revised its full-year 2024 adjusted EPS guidance to a range of $6.40 to $6.65, down from its previous forecast of at least $7.00 and below the analyst consensus of $6.97. The company also lowered its cash flow from operations guidance to approximately $9.0 billion from at least $10.5 billion previously.
Karen S. Lynch, CVS Health President and CEO, commented on the results: "We are taking action today to ensure we make the most of our many opportunities, including leadership changes in the Health Care Benefits segment."
The company attributed the guidance cut to continued pressure in the Health Care Benefits segment, which experienced a decline in operating results due to utilization pressure and the unfavorable impact of Medicare Advantage star ratings for the 2024 payment year.
Despite the challenges, CVS Health reported strong performance in its Health Services and Pharmacy & Consumer Wellness segments, which partially offset the pressure in Health Care Benefits.
The company's total revenues for the quarter increased primarily due to growth in the Health Care Benefits and Pharmacy & Consumer Wellness segments, while the Health Services segment saw a decline.
CVS Health's adjusted operating income decreased by 16.4% in Q2, primarily driven by declines in the Health Care Benefits and Pharmacy & Consumer Wellness segments, partially offset by an increase in the Health Services segment.
Reacting to the report, analysts at Mizuho said in a note that it was "another step down in 2024."
"While expectations were high for another guidance reduction, we believe key focuses of the 8AM call will be whether the new guide de-risks earnings going forward, commentary on the company's bid strategy for Medicare Advantage in 2025 and whether the company reiterates its expectation for double-digit EPS growth for 2025," they stated.
Meanwhile, analysts at TD Cowen said CVS's revised guidance and 2Q beat implies it expects HCB to further pressure performance in 2H.
"The introduction of a $2B cost-cutting plan (PCW focused) and leadership changes at AET show company is finally realizing (a bit late) that it needs to make more significant changes to turn around performance," wrote the firm.