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CVS Health (CVS) Down 1% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for CVS Health (CVS - Free Report) . Shares have lost about 1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is CVS Health due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
CVS Health Q4 Earnings Top Estimates, 2024 EPS View Down
CVS Health fourth-quarter 2023 adjusted earnings per share of $2.12 rose 3.9% year over year and exceeded the Zacks Consensus Estimate by 5.5%. 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 $1.58 per share compared with the year-ago GAAP EPS of $1.77, down 10.7%.
For the full year, adjusted earnings were $8.74 per share, down 3.2% from the year-ago period’s levels. It surpassed the Zacks Consensus Estimate by 1.4%.
Revenues
Revenues in the fourth quarter rose 11.9% year over year to $93.8 billion. The top line also beat the Zacks Consensus Estimate by 3.3%.
Total revenues for 2023 were $357.78 billion, up 10.9% from the year-ago period’s levels. The figure beat the Zacks Consensus Estimate by 0.9%.
Quarter in Detail
Effective from the first quarter of 2023, CVS Health 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 12.3% to $49.15 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 inched up 0.09% on a 30-day equivalent basis, driven by net new business and increased utilization. This increase was offset by the impact of a Medicaid customer contract change that occurred during the second quarter of 2023 and a decline in COVID-19 vaccinations.
Revenues from CVS Health’s Pharmacy & Consumer Wellness segment were up 8.6% year over year to $31.18 billion. The upside was driven by increased prescription and front store volume, pharmacy drug mix and brand inflation and increased contributions from vaccinations. However, the upside was partially offset by increased prescription volume, improved generic drug purchasing and lower operating expenses.
Within the Health Care Benefits segment, the company registered revenues worth $26.73 billion in the fourth quarter, up 16.1% year over year, driven by growth across all product lines.
Margin
Total cost (including Benefit Costs) rose 11% to $57.42 billion in the fourth quarter. Gross profit rose 13.3% to $36.39 billion. The gross margin expanded 48-basis points (bps) to 38.8%.
The adjusted operating margin in the quarter under review contracted 174 bps to 14.8% on a 23.3% rise in operating expenses to $22.52 billion.
2024 Guidance
CVS Health updated EPS guidance due to elevated medical cost trends in 2024.
CVS Health expects adjusted EPS guidance for full-year 2024 to be at least $8.30 (down from the previous guidance of at least $8.50). The Zacks Consensus Estimate for 2024 earnings is pegged at $8.60.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -13.45% due to these changes.
VGM Scores
Currently, CVS Health has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, CVS Health has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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CVS Health (CVS) Down 1% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for CVS Health (CVS - Free Report) . Shares have lost about 1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is CVS Health due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
CVS Health Q4 Earnings Top Estimates, 2024 EPS View Down
CVS Health fourth-quarter 2023 adjusted earnings per share of $2.12 rose 3.9% year over year and exceeded the Zacks Consensus Estimate by 5.5%. 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 $1.58 per share compared with the year-ago GAAP EPS of $1.77, down 10.7%.
For the full year, adjusted earnings were $8.74 per share, down 3.2% from the year-ago period’s levels. It surpassed the Zacks Consensus Estimate by 1.4%.
Revenues
Revenues in the fourth quarter rose 11.9% year over year to $93.8 billion. The top line also beat the Zacks Consensus Estimate by 3.3%.
Total revenues for 2023 were $357.78 billion, up 10.9% from the year-ago period’s levels. The figure beat the Zacks Consensus Estimate by 0.9%.
Quarter in Detail
Effective from the first quarter of 2023, CVS Health 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 12.3% to $49.15 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 inched up 0.09% on a 30-day equivalent basis, driven by net new business and increased utilization. This increase was offset by the impact of a Medicaid customer contract change that occurred during the second quarter of 2023 and a decline in COVID-19 vaccinations.
Revenues from CVS Health’s Pharmacy & Consumer Wellness segment were up 8.6% year over year to $31.18 billion. The upside was driven by increased prescription and front store volume, pharmacy drug mix and brand inflation and increased contributions from vaccinations. However, the upside was partially offset by increased prescription volume, improved generic drug purchasing and lower operating expenses.
Within the Health Care Benefits segment, the company registered revenues worth $26.73 billion in the fourth quarter, up 16.1% year over year, driven by growth across all product lines.
Margin
Total cost (including Benefit Costs) rose 11% to $57.42 billion in the fourth quarter. Gross profit rose 13.3% to $36.39 billion. The gross margin expanded 48-basis points (bps) to 38.8%.
The adjusted operating margin in the quarter under review contracted 174 bps to 14.8% on a 23.3% rise in operating expenses to $22.52 billion.
2024 Guidance
CVS Health updated EPS guidance due to elevated medical cost trends in 2024.
CVS Health expects adjusted EPS guidance for full-year 2024 to be at least $8.30 (down from the previous guidance of at least $8.50). The Zacks Consensus Estimate for 2024 earnings is pegged at $8.60.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -13.45% due to these changes.
VGM Scores
Currently, CVS Health has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, CVS Health has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.