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CVS Health (CVS) Q2 Earnings Surpass Estimates, Margins Up
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CVS Health Corporation's (CVS - Free Report) second-quarter 2023 adjusted earnings per share (EPS) of $2.21 declined 12.6% year over year but exceeded the Zacks Consensus Estimate by 4.3%. 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 $1.48 per share, down 35.4% year over year.
Total revenues in the second quarter rose 10.3% year over year to $88.92 billion. The top line also beat the Zacks Consensus Estimate by 2.5%.
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 fulfilment and retail front store operations).
Health Services revenues were up 7.6% to $46.22 billion in the reported quarter. The upside was primarily driven by pharmacy drug mix, growth in specialty pharmacy, brand inflation and the acquisitions of Oak Street Health and Signify Health, partially offset by continued client price improvements.
Total pharmacy claims processed fell 1.2% on a 30-day equivalent basis, reflecting an expected Medicaid customer contract change and a decrease in COVID-19 vaccinations. The decline was largely offset by net new business.
Revenues from CVS Health’s Pharmacy & Consumer Wellness segment were up 7.6% year over year to $28.78 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 impact of recent generic introductions, decreased COVID-19 vaccinations, diagnostic testing and over-the-counter (“OTC”) test kit sales, continued pharmacy reimbursement pressure and a decrease in store count.
Within the Health Care Benefits segment, the company registered revenues worth $26.75 billion in the second quarter, up 17.6% year over year driven by growth across all product lines.
Margin
Total cost (including Benefit Costs) rose 8.6% to $55.53 billion in the second quarter. Gross profit rose 12.9% to $35.38 billion. The gross margin expanded 92 basis points (bps) to 39.8%.
CVS Health Corporation Price, Consensus and EPS Surprise
The adjusted operating margin in the quarter under review contracted 188 bps to 15.3% on a 24.5% rise in operating expenses to $21.78 billion.
2023 Guidance
CVS Health restated its adjusted EPS guidance for full-year 2023 to the band of $8.50-$8.70 from $8.70 to $8.90. The Zacks Consensus Estimate for 2023 earnings is pegged at $8.60.
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’s second-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 Service segment, pharmacy drug mix, growth in specialty pharmacy, brand inflation drove year-over-year growth. During the second quarter of 2023, the Company developed an enterprise-wide restructuring plan intended to streamline and simplify the organization, improve efficiency and reduce costs.
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.
Zacks Rank and Key Picks
CVS Health currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories (ABT - Free Report) , Elevance Health, Inc. (ELV - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) .
Abbott, carrying a Zacks Rank of 2, reported second-quarter 2023 adjusted EPS of $1.08, beating the Zacks Consensus Estimate by 3.8%. Revenues of $9.98 billion outpaced the consensus mark by 2.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 12.4%.
Elevance Health reported second-quarter 2023 adjusted EPS of $9.04, beating the Zacks Consensus Estimate by 2.5%. Revenues of $43.38 billion surpassed the Zacks Consensus Estimate by 4.5%. It currently carries a Zacks Rank #2.
Elevance Health has a long-term estimated growth rate of 12.1%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 2.8%.
Intuitive Surgical reported second-quarter 2023 adjusted EPS of $1.42, beating the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the Zacks Consensus Estimate by 1.4%. It currently carries a Zacks Rank #2.
Intuitive Surgical has a long-term estimated growth rate of 14.5%. ISRG’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 4.2%.
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CVS Health (CVS) Q2 Earnings Surpass Estimates, Margins Up
CVS Health Corporation's (CVS - Free Report) second-quarter 2023 adjusted earnings per share (EPS) of $2.21 declined 12.6% year over year but exceeded the Zacks Consensus Estimate by 4.3%. 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 $1.48 per share, down 35.4% year over year.
Total revenues in the second quarter rose 10.3% year over year to $88.92 billion. The top line also beat the Zacks Consensus Estimate by 2.5%.
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 fulfilment and retail front store operations).
Health Services revenues were up 7.6% to $46.22 billion in the reported quarter. The upside was primarily driven by pharmacy drug mix, growth in specialty pharmacy, brand inflation and the acquisitions of Oak Street Health and Signify Health, partially offset by continued client price improvements.
Total pharmacy claims processed fell 1.2% on a 30-day equivalent basis, reflecting an expected Medicaid customer contract change and a decrease in COVID-19 vaccinations. The decline was largely offset by net new business.
Revenues from CVS Health’s Pharmacy & Consumer Wellness segment were up 7.6% year over year to $28.78 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 impact of recent generic introductions, decreased COVID-19 vaccinations, diagnostic testing and over-the-counter (“OTC”) test kit sales, continued pharmacy reimbursement pressure and a decrease in store count.
Within the Health Care Benefits segment, the company registered revenues worth $26.75 billion in the second quarter, up 17.6% year over year driven by growth across all product lines.
Margin
Total cost (including Benefit Costs) rose 8.6% to $55.53 billion in the second quarter. Gross profit rose 12.9% to $35.38 billion. The gross margin expanded 92 basis points (bps) to 39.8%.
CVS Health Corporation Price, Consensus and EPS Surprise
CVS Health Corporation price-consensus-eps-surprise-chart | CVS Health Corporation Quote
The adjusted operating margin in the quarter under review contracted 188 bps to 15.3% on a 24.5% rise in operating expenses to $21.78 billion.
2023 Guidance
CVS Health restated its adjusted EPS guidance for full-year 2023 to the band of $8.50-$8.70 from $8.70 to $8.90. The Zacks Consensus Estimate for 2023 earnings is pegged at $8.60.
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’s second-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 Service segment, pharmacy drug mix, growth in specialty pharmacy, brand inflation drove year-over-year growth. During the second quarter of 2023, the Company developed an enterprise-wide restructuring plan intended to streamline and simplify the organization, improve efficiency and reduce costs.
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.
Zacks Rank and Key Picks
CVS Health currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories (ABT - Free Report) , Elevance Health, Inc. (ELV - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) .
Abbott, carrying a Zacks Rank of 2, reported second-quarter 2023 adjusted EPS of $1.08, beating the Zacks Consensus Estimate by 3.8%. Revenues of $9.98 billion outpaced the consensus mark by 2.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 12.4%.
Elevance Health reported second-quarter 2023 adjusted EPS of $9.04, beating the Zacks Consensus Estimate by 2.5%. Revenues of $43.38 billion surpassed the Zacks Consensus Estimate by 4.5%. It currently carries a Zacks Rank #2.
Elevance Health has a long-term estimated growth rate of 12.1%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 2.8%.
Intuitive Surgical reported second-quarter 2023 adjusted EPS of $1.42, beating the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the Zacks Consensus Estimate by 1.4%. It currently carries a Zacks Rank #2.
Intuitive Surgical has a long-term estimated growth rate of 14.5%. ISRG’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 4.2%.