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CVS Health (CVS) Q1 Earnings Surpass Estimates, EPS View Cut
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CVS Health Corporation's (CVS - Free Report) first-quarter 2023 adjusted earnings per share (EPS) of $2.20 declined 4.3% year over year but exceeded the Zacks Consensus Estimate by 6.3%. The adjusted EPS figure considers certain asset amortization costs, loss on assets held for sale, and other adjustments.
On a reported basis, the company’s GAAP earnings were $1.65 per share, down 6.8% year over year.
Total revenues in the first quarter rose 11% year over year to $85.28 billion. The top line also beat the Zacks Consensus Estimate by 4.5%.
Quarter in Detail
The company recently realigned the composition of its segments. It created the Health Services segment (comprising the company’s pharmacy benefit management operations, health care services and provider enablement solutions) and the Pharmacy & Consumer Wellness segment (comprising enterprise pharmacy fulfillment and retail front store operations).
Health Services revenues were up 12.6% to $44.59 billion in the reported quarter. The upside was primarily driven by increased pharmacy claims volume, and growth in specialty pharmacy and brand inflation, partially offset by continued client price improvements.
Total pharmacy claims processed rose 3.7% on a 30-day equivalent basis, attributable to net new business, increased utilization and the impact of an elevated cough, cold and flu season, partially offset by a decrease in COVID-19 vaccinations. Excluding the impact of COVID-19 vaccinations, total pharmacy claims processed increased 4.8% on a 30-day equivalent basis.
CVS Health Corporation Price, Consensus and EPS Surprise
Revenues from CVS Health’s Pharmacy & Consumer Wellness segment were up 7.8% year over year to $27.92 billion. The impressive growth was driven by increased prescription and front store volume, pharmacy drug mix and brand inflation. However, this growth was partially offset by continued pharmacy reimbursement pressure, decreased COVID-19 vaccinations and diagnostic testing and the impact of recent generic introductions.
Within the Health Care Benefits segment, the company registered revenues worth $25.89 billion in the first quarter, up 12.1% year over year driven by growth across all product lines.
Margin
Total cost (including Benefit Costs) rose 13.4% to $71.90 billion in the first quarter. Gross profit dropped 0.1% to $13.38 billion. The gross margin contracted 175 basis points (bps) to 15.7%.
The adjusted operating margin in the quarter under review contracted 85 bps to 4.5% on a 2.7% rise in operating expenses to $9.58 billion.
2023 Guidance
CVS Health reduced its adjusted EPS guidance for full-year 2023 to the band of $8.50 to $8.70 from $8.70 to $8.90. The Zacks Consensus Estimate for 2023 earnings is pegged at $8.76.
The company has reiterated its full-year operating cash flow projection in the range of $12.5 billion to $13.5 billion.
Our Take
CVS Health first-quarter 2023 earnings and revenues beat the Zacks Consensus Estimate. Robust sales growth across all three operating segments drove the top-line results. Within the Health Care Benefits arm, continued growth across the entire range of insured and self-insured medical, pharmacy, dental and behavioral health products and services instills optimism. Meanwhile, the company has completed the colossal $10.6-billion acquisition of Oak Street Health. Oak Street Health is a network of value-based primary care centers for adults on Medicare. The acquisition is expected to further advance CVS Health’s care delivery strategy for consumers.
However, the contraction of margins on escalating costs does not bode well. The decline in COVID-19 vaccinations and testing sales is a downside. Further, persistent pharmacy reimbursement headwinds also continued to impact business performance in the quarter under review. The reduced adjusted EPS guidance despite an earnings beat is a concern too.
Zacks Rank and Key Picks
CVS Health currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Edwards Lifesciences Corporation (EW - Free Report) , Intuitive Surgical, Inc. (ISRG - Free Report) and Johnson & Johnson (JNJ - Free Report) .
Edwards Lifesciences, carrying a Zacks Rank #2 (Buy), reported first-quarter 2023 adjusted EPS of 62 cents, beating the Zacks Consensus Estimate by 1.6%. Revenues of $1.46 billion outpaced the consensus mark by 4.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Edwards Lifesciences has a long-term estimated growth rate of 6.8%. EW’s earnings surpassed estimates in two of the trailing four quarters, missed the same in one and came in line in the other, the average being 1.2%.
Intuitive Surgical, having a Zacks Rank #2, reported a first-quarter 2023 adjusted EPS of $1.23, which beat the Zacks Consensus Estimate by 3.4%. Revenues of $1.70 billion outpaced the consensus mark by 6.9%.
Intuitive Surgical has a long-term estimated growth rate of 13%. ISRG’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 1.9%.
Johnson & Johnson reported first-quarter 2023 adjusted earnings of $2.68 per share, beating the Zacks Consensus Estimate by 6.8%. Revenues of $24.75 billion surpassed the Zacks Consensus Estimate by 5%. It currently carries a Zacks Rank #2.
Johnson & Johnson has a long-term estimated growth rate of 5.5%. JNJ’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 3.9%.
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CVS Health (CVS) Q1 Earnings Surpass Estimates, EPS View Cut
CVS Health Corporation's (CVS - Free Report) first-quarter 2023 adjusted earnings per share (EPS) of $2.20 declined 4.3% year over year but exceeded the Zacks Consensus Estimate by 6.3%. The adjusted EPS figure considers certain asset amortization costs, loss on assets held for sale, and other adjustments.
On a reported basis, the company’s GAAP earnings were $1.65 per share, down 6.8% year over year.
Total revenues in the first quarter rose 11% year over year to $85.28 billion. The top line also beat the Zacks Consensus Estimate by 4.5%.
Quarter in Detail
The company recently realigned the composition of its segments. It created the Health Services segment (comprising the company’s pharmacy benefit management operations, health care services and provider enablement solutions) and the Pharmacy & Consumer Wellness segment (comprising enterprise pharmacy fulfillment and retail front store operations).
Health Services revenues were up 12.6% to $44.59 billion in the reported quarter. The upside was primarily driven by increased pharmacy claims volume, and growth in specialty pharmacy and brand inflation, partially offset by continued client price improvements.
Total pharmacy claims processed rose 3.7% on a 30-day equivalent basis, attributable to net new business, increased utilization and the impact of an elevated cough, cold and flu season, partially offset by a decrease in COVID-19 vaccinations. Excluding the impact of COVID-19 vaccinations, total pharmacy claims processed increased 4.8% on a 30-day equivalent basis.
CVS Health Corporation Price, Consensus and EPS Surprise
CVS Health Corporation price-consensus-eps-surprise-chart | CVS Health Corporation Quote
Revenues from CVS Health’s Pharmacy & Consumer Wellness segment were up 7.8% year over year to $27.92 billion. The impressive growth was driven by increased prescription and front store volume, pharmacy drug mix and brand inflation. However, this growth was partially offset by continued pharmacy reimbursement pressure, decreased COVID-19 vaccinations and diagnostic testing and the impact of recent generic introductions.
Within the Health Care Benefits segment, the company registered revenues worth $25.89 billion in the first quarter, up 12.1% year over year driven by growth across all product lines.
Margin
Total cost (including Benefit Costs) rose 13.4% to $71.90 billion in the first quarter. Gross profit dropped 0.1% to $13.38 billion. The gross margin contracted 175 basis points (bps) to 15.7%.
The adjusted operating margin in the quarter under review contracted 85 bps to 4.5% on a 2.7% rise in operating expenses to $9.58 billion.
2023 Guidance
CVS Health reduced its adjusted EPS guidance for full-year 2023 to the band of $8.50 to $8.70 from $8.70 to $8.90. The Zacks Consensus Estimate for 2023 earnings is pegged at $8.76.
The company has reiterated its full-year operating cash flow projection in the range of $12.5 billion to $13.5 billion.
Our Take
CVS Health first-quarter 2023 earnings and revenues beat the Zacks Consensus Estimate. Robust sales growth across all three operating segments drove the top-line results. Within the Health Care Benefits arm, continued growth across the entire range of insured and self-insured medical, pharmacy, dental and behavioral health products and services instills optimism. Meanwhile, the company has completed the colossal $10.6-billion acquisition of Oak Street Health. Oak Street Health is a network of value-based primary care centers for adults on Medicare. The acquisition is expected to further advance CVS Health’s care delivery strategy for consumers.
However, the contraction of margins on escalating costs does not bode well. The decline in COVID-19 vaccinations and testing sales is a downside. Further, persistent pharmacy reimbursement headwinds also continued to impact business performance in the quarter under review. The reduced adjusted EPS guidance despite an earnings beat is a concern too.
Zacks Rank and Key Picks
CVS Health currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Edwards Lifesciences Corporation (EW - Free Report) , Intuitive Surgical, Inc. (ISRG - Free Report) and Johnson & Johnson (JNJ - Free Report) .
Edwards Lifesciences, carrying a Zacks Rank #2 (Buy), reported first-quarter 2023 adjusted EPS of 62 cents, beating the Zacks Consensus Estimate by 1.6%. Revenues of $1.46 billion outpaced the consensus mark by 4.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Edwards Lifesciences has a long-term estimated growth rate of 6.8%. EW’s earnings surpassed estimates in two of the trailing four quarters, missed the same in one and came in line in the other, the average being 1.2%.
Intuitive Surgical, having a Zacks Rank #2, reported a first-quarter 2023 adjusted EPS of $1.23, which beat the Zacks Consensus Estimate by 3.4%. Revenues of $1.70 billion outpaced the consensus mark by 6.9%.
Intuitive Surgical has a long-term estimated growth rate of 13%. ISRG’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 1.9%.
Johnson & Johnson reported first-quarter 2023 adjusted earnings of $2.68 per share, beating the Zacks Consensus Estimate by 6.8%. Revenues of $24.75 billion surpassed the Zacks Consensus Estimate by 5%. It currently carries a Zacks Rank #2.
Johnson & Johnson has a long-term estimated growth rate of 5.5%. JNJ’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 3.9%.