CVS posts mixed Q2, to cut $2B in costs — Aetna exec out
CVS Health Corp.’s second-quarter profit fell as rising medical costs continue to challenge its health care benefits business, which includes health insurer Aetna.
The company said that, based on the current performance and outlook for the the health care benefits segment, it was making leadership changes effective immediately. Brian Kane, president of Aetna, is leaving the company. CVS president and CEO Karen Lynch will assume direct leadership of the segment and will oversee the day-to-day management of the business along with CFO Tom Cowhey.
In addition, Katerina Guerraz, executive VP and chief strategy officer, will be the COO of the health care benefits segment. She is a 20-year Aetna veteran with extensive Commercial and Medicare experience, the company said.
On the earnings call, CVS executives announced a plan to cut $2 billion in expenses during the next several years. The company plans to streamline its business operations, “rationalize” its business portfolio and ramp up the implementation of artificial intelligence and automation.
Net income fell to $1.77 billion, or $1.41 a share, in the quarter ended June 30, down from $1.90 billion, or $1.48 a share, in the year-ago period. Adjusted earnings per share were $1.83, down from $2.21 last year, but way ahead of analysts’ estimates of $1.73 per share.
Total revenue rose 2.6% to $91.23 billion, missing estimates of $91.41 billion. Total same-store sales rose 6.4%. Pharmacy same-store sales increased 9.1%. Front store same-store sales fell 4%.
Revenue in the health care benefits segment revenue rose 21.4% to $32.48 billion. However, the segment’s adjusted operating income dropped 39.1% to $983 million and the medical-benefit ratio, in which a lower percentage means higher profitability, increased to 89.6% from 86.2%.
CVS cuts its its 2024 adjusted earnings for the third time this year. It nows expects earnings of $6.40 to $6.65 per share, down from previous guidance of at least $7 per share.
“Our updated guidance range now reflect that trends in the second half of 2024 that could be higher than levels seen in the first,” Cowhey said on the earnings call. “It is worth noting that if trends persist at an elevated level, we may be required to take a 2024 premium deficiency reserve in our Medicare program.”
