CVS Q3 revenue rises but earnings down; makes two leadership appointments
CVS Health reported mixed third-quarter results as its revenue rose but higher medical costs in its troubled health insurance arm and a big restructuring charge put pressure on its bottom line.
It was the pharmacy and health care services company’s first earnings report since veteran health executive David Joyner was named CEO (effective Oct. 17), replacing Karen Lynch, who left CVS “in agreement with” the board. Along with the earnings report, CVS made two leadership appointments, including a new leader for Aetna.
“Establishing credibility and earning your trust is one of my top priorities as the new leader of CVS Health,” Joyner told investors on the company’s earnings call. "I recognize that in order to achieve that, any guidance we provide should be achievable with clear opportunities for outperformance. This must be a core principal, and in order to deliver on that commitment to you, I want to spend more time understanding the complexities and challenges facing our Aetna business and will provide an update when appropriate.”
Net income fell to $87 million, or $0.07 cents a share, for the quarter ended Sept. 30, from $2.26 billion, or $1.75 a share, in the year-ago period. Adjusted earnings per share were $1.09, missing estimates of $1.44.
CVS said the earnings decline was mostly due to weakness in the healthcare-benefits segment which resulted from continued pressure on utilization and included $1.1 billion, or $0.63 a share, in charges to record premium deficiency reserves.
“We have been more acutely impacted than others in the industry from rising medical costs in MA and Medicaid,” Joyner told investors on the call.
CVS also recorded restructuring charges of $1.17 billion in the quarter, which included $607 million for additional stores it plans to shutter in 2025, $293 million related to layoffs and $269 million of other asset impairments and related charges associated with the discontinuation of certain non-core assets.
Total revenue rose 6.3% to $95.43 billion, topping estimates of $92.72 billion. The increase was primarily driven by growth in the health care benefits and pharmacy & consumer wellness segments, partially offset by a decline in the health services segment.
Sales in the company’s pharmacy and consumer wellness division rose more than 12% to $32.42 billion, partly driven by increased prescription volume. Revenue in the health services segment fell nearly 6% to $44.13 billion.
“Our third quarter results reflect strong performance in the health services and pharmacy and consumer wellness segments, and also highlight the continued need to work across our enterprise and address macro challenges to the health care benefits segment,” Joyner said in the earnings release.
Leadership appointments
In other news, CVS made two leadership appointments, both effective Nov. 6.
The company named Prem Shah as group president, responsible for the operational performance and integrated value creation across CVS Caremark, CVS Pharmacy, and the company’s health care delivery businesses. Shah joined CVS Health in 2013 and was most recently executive VP and chief pharmacy officer, CVS Health and president, pharmacy and consumer wellness
In addition, the company announced the appointment of Steve Nelson as president of Aetna. He most recently served as CEO of ChenMed, a leading value-based primary care company. He is also a former CEO of UnitedHealthcare, a $200 billion division of UnitedHealth Group.
