We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
CVS Health (CVS) Q4 Earnings Surpass Estimates, Margins Down
Read MoreHide Full Article
CVS Health Corporation's (CVS - Free Report) fourth-quarter 2022 adjusted earnings per share (EPS) of $1.99 improved 0.5% year over year and exceeded the Zacks Consensus Estimate by 3.1%. The adjusted EPS figure considers certain asset amortization costs, opioid litigation charges, and other adjustments.
On a reported basis, the company’s GAAP earnings were $1.75 per share, up 78.6% year over year.
For the full year, adjusted earnings were $8.69 per share, up 3.5% from the year-ago period’s levels. The figure beat the Zacks Consensus Estimate by 0.7%.
Total revenues in the fourth quarter rose 9.5% year over year to $83.85 billion. The top line also beat the Zacks Consensus Estimate by 11.8%.
Total revenues for 2022 were $322.47 billion, reflecting a 10.4% rise from the year-ago period. The figure beat the Zacks Consensus Estimate by 2.9%.
Quarter in Detail
Pharmacy Services revenues were up 11.2% to $43.75 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 3.1% 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 4.6% on a 30-day equivalent basis.
CVS Health Corporation Price, Consensus and EPS Surprise
Revenues from CVS Health’s Retail/LTC segment were up 4% year over year to $28.18 billion. The impressive growth was driven by increased prescription and front store volume, including the impact of an elevated cough, cold and flu season compared to the prior year, pharmacy drug mix and brand inflation. However, this growth was partially offset by a decline in COVID-19 diagnostic testing and vaccinations, the impact of recent generic introductions and continued pharmacy reimbursement pressure.
Within the Health Care Benefits segment, the company registered revenues worth $23.03 billion in the fourth quarter, up 11.3% year over year.
Margin
Total cost (including Benefit Costs) rose 11.2% to $70.03 billion in the fourth quarter. Gross profit rose 1.2% to $13.81 billion. The gross margin contracted 135 basis points (bps) to 16.5%.
The adjusted operating margin in the quarter under review contracted 24 bps to 4.4%, despite a 3.9% rise in adjusted operating profit to $3.73 billion.
2023 Guidance
CVS Health reaffirmed its adjusted EPS guidance for full-year 2023 in the band of $8.70 to $8.90. The Zacks Consensus Estimate for 2023 earnings is pegged at $8.84.
The company has also issued its full-year operating cash flow projection in the range of $12.5 billion to $13.5 billion.
Our Take
CVS Health exited the fourth quarter of 2022 on a strong note, with earnings and revenues beating the respective Zacks Consensus Estimate. Robust sales growth across all three operating segments drove the top-line results. Within the Health Care Benefits arm, the 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’s parallel announcement of entering into a colossal $10.6-billion acquisition agreement to purchase Oak Street Health is an added positive. 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.
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 Cardinal Health, Inc. (CAH - Free Report) , McKesson Corporation (MCK - Free Report) and Hologic, Inc. (HOLX - Free Report) .
Cardinal Health, carrying a Zacks Rank #2 (Buy), reported second-quarter fiscal 2023 adjusted EPS of $1.32, beating the Zacks Consensus Estimate by 16.8%. Revenues of $51.47 billion outpaced the consensus mark by 2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cardinal Health has a long-term estimated growth rate of 11.6%. CAH’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 6.4%.
McKesson, having a Zacks Rank #2, reported third-quarter fiscal 2023 adjusted EPS of $6.90, which beat the Zacks Consensus Estimate by 8.8%. Revenues of $70.49 billion outpaced the consensus mark by 0.02%.
McKesson has a long-term estimated growth rate of 10.4%. MCK’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 3.4%.
Hologic reported first-quarter fiscal 2023 adjusted earnings of $1.07 per share, beating the Zacks Consensus Estimate by 18.9%. Revenues of $1.07 billion surpassed the Zacks Consensus Estimate by 9.5%. It currently sports a Zacks Rank #1.
Hologic has a long-term estimated growth rate of 15.2%. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 30.6%.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Shutterstock
CVS Health (CVS) Q4 Earnings Surpass Estimates, Margins Down
CVS Health Corporation's (CVS - Free Report) fourth-quarter 2022 adjusted earnings per share (EPS) of $1.99 improved 0.5% year over year and exceeded the Zacks Consensus Estimate by 3.1%. The adjusted EPS figure considers certain asset amortization costs, opioid litigation charges, and other adjustments.
On a reported basis, the company’s GAAP earnings were $1.75 per share, up 78.6% year over year.
For the full year, adjusted earnings were $8.69 per share, up 3.5% from the year-ago period’s levels. The figure beat the Zacks Consensus Estimate by 0.7%.
Total revenues in the fourth quarter rose 9.5% year over year to $83.85 billion. The top line also beat the Zacks Consensus Estimate by 11.8%.
Total revenues for 2022 were $322.47 billion, reflecting a 10.4% rise from the year-ago period. The figure beat the Zacks Consensus Estimate by 2.9%.
Quarter in Detail
Pharmacy Services revenues were up 11.2% to $43.75 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 3.1% 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 4.6% 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 Retail/LTC segment were up 4% year over year to $28.18 billion. The impressive growth was driven by increased prescription and front store volume, including the impact of an elevated cough, cold and flu season compared to the prior year, pharmacy drug mix and brand inflation. However, this growth was partially offset by a decline in COVID-19 diagnostic testing and vaccinations, the impact of recent generic introductions and continued pharmacy reimbursement pressure.
Within the Health Care Benefits segment, the company registered revenues worth $23.03 billion in the fourth quarter, up 11.3% year over year.
Margin
Total cost (including Benefit Costs) rose 11.2% to $70.03 billion in the fourth quarter. Gross profit rose 1.2% to $13.81 billion. The gross margin contracted 135 basis points (bps) to 16.5%.
The adjusted operating margin in the quarter under review contracted 24 bps to 4.4%, despite a 3.9% rise in adjusted operating profit to $3.73 billion.
2023 Guidance
CVS Health reaffirmed its adjusted EPS guidance for full-year 2023 in the band of $8.70 to $8.90. The Zacks Consensus Estimate for 2023 earnings is pegged at $8.84.
The company has also issued its full-year operating cash flow projection in the range of $12.5 billion to $13.5 billion.
Our Take
CVS Health exited the fourth quarter of 2022 on a strong note, with earnings and revenues beating the respective Zacks Consensus Estimate. Robust sales growth across all three operating segments drove the top-line results. Within the Health Care Benefits arm, the 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’s parallel announcement of entering into a colossal $10.6-billion acquisition agreement to purchase Oak Street Health is an added positive. 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.
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 Cardinal Health, Inc. (CAH - Free Report) , McKesson Corporation (MCK - Free Report) and Hologic, Inc. (HOLX - Free Report) .
Cardinal Health, carrying a Zacks Rank #2 (Buy), reported second-quarter fiscal 2023 adjusted EPS of $1.32, beating the Zacks Consensus Estimate by 16.8%. Revenues of $51.47 billion outpaced the consensus mark by 2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cardinal Health has a long-term estimated growth rate of 11.6%. CAH’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 6.4%.
McKesson, having a Zacks Rank #2, reported third-quarter fiscal 2023 adjusted EPS of $6.90, which beat the Zacks Consensus Estimate by 8.8%. Revenues of $70.49 billion outpaced the consensus mark by 0.02%.
McKesson has a long-term estimated growth rate of 10.4%. MCK’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 3.4%.
Hologic reported first-quarter fiscal 2023 adjusted earnings of $1.07 per share, beating the Zacks Consensus Estimate by 18.9%. Revenues of $1.07 billion surpassed the Zacks Consensus Estimate by 9.5%. It currently sports a Zacks Rank #1.
Hologic has a long-term estimated growth rate of 15.2%. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 30.6%.