Boston, MA – CVS Health Corp announced a significant cut to its annual profit forecast and fell short of Wall Street expectations for first-quarter earnings. The company cited increased demand for non-urgent medical procedures leading to higher costs in its health insurance division.
The U.S. healthcare giant revised its per-share adjusted earnings forecast for 2024 down to a minimum of $7.00 from the initial projection of at least $8.30. This adjustment reflects CVS’s anticipation of continued high volumes of medical procedures within its Aetna health insurer unit.
As a result of the news, CVS’s stock price dropped by 9.7% to $61.15 in premarket trading. Since the beginning of the year, the company’s shares have declined by approximately 14%.
The surge in medical costs facing CVS echoes a broader trend within the U.S. health insurance industry. Healthcare providers have been grappling with elevated costs stemming from pent-up demand for medical procedures that were postponed during the COVID-19 pandemic.
In particular, CVS noted an uptick in hip and knee surgeries, eye-related medical services, dental procedures, and vaccinations, including the RSV shot, in the final quarter of 2023.
Furthermore, the company revealed that its health care benefits segment, which includes the Aetna unit, saw its medical cost ratio increase to 90.4% for the first quarter. This figure represents a significant jump from the 84.6% ratio reported a year earlier and exceeded analysts’ projections.
Additionally, concerns surrounding Medicare Advantage health plans have raised further uncertainties for CVS. With reimbursement rates for providers expected to be lower than anticipated in 2025, companies like Aetna are bracing for potential margin pressures. This news comes on the heels of Humana’s decision to retract its 2025 profit forecast due to disappointing rates.
Despite these challenges, CVS remains committed to achieving low double-digit percentage growth in the coming years, as indicated in its withdrawal of the 2025 adjusted earnings forecast of $10 per share last August.
For the first quarter ending on March 31, CVS reported an adjusted profit of $1.31 per share, falling short of analysts’ average estimate of $1.69. The company’s financial performance reflects the broader landscape of the healthcare industry grappling with evolving demands and cost pressures.