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CVS Health (CVS) Beats Q2 Earnings, Narrows '24 EPS Outlook
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CVS Health Corporation (CVS - Free Report) posted adjusted earnings per share (EPS) of $1.83 in the second quarter of 2024, down 17.2% year over year. However, the metric topped the Zacks Consensus Estimate by 5.2%. 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 $1.41, down 4.7% year over year.
Revenues
Revenues in the second quarter rose 2.6% year over year to $91.23 billion. However, the top line missed the Zacks Consensus Estimate by 0.4%. The year-over-year upside was primarily driven by growth in the Health Care Benefits and Pharmacy & Consumer Wellness segments.
Quarter in Detail
Health Services revenues were down 8.8% to $42.17 billion in the reported quarter. The downside was mainly due to the previously announced loss of a large client and continued pharmacy client price improvements.
The decline was partially offset by the pharmacy drug mix, increased contributions from the company's healthcare delivery assets and growth in specialty pharmacy.
CVS Health Corporation Price, Consensus and EPS Surprise
Total pharmacy claims processed declined 18.3% on a 30-day equivalent basis due to the previous loss of a large number of clients during the second quarter of 2024.
Revenues in CVS Health’s Pharmacy & Consumer Wellness segment were up 3.7% year over year to $29.84 billion. The upside was primarily driven by increased prescription volume and pharmacy drug mix.
Within the Health Care Benefits segment, the company registered revenues worth $32.48 billion in the second quarter, up 21.4% year over year. The upside was driven by growth in the Medicare and Commercial product lines.
Margins
Total costs fell 6.6% to $50 billion in the second quarter. The gross profit rose 16.5% to $41.24 billion. The gross margin expanded 540 basis points (bps) to 45.2%.
The adjusted operating margin in the quarter under review expanded 518 bps to 34% despite a 4.7% rise in operating expenses to $10.34 billion.
Liquidity Position
CVS Health exited the second quarter of 2024 with cash and cash equivalents of $12.51 billion compared with $9.80 billion at the end of the first quarter. The long-term debt was $62.64 billion compared with $57.69 billion at the end of the first quarter.
The cumulative net cash provided by operating activities at the end of the second quarter of 2024 was $7.99 billion compared with $13.35 billion in the year-ago period.
2024 Guidance
CVS Health provided an updated guidance.
The company expects adjusted EPS guidance for full-year 2024 in the band of $6.40-$6.65 (earlier, at least $7.00). The Zacks Consensus Estimate for 2024 earnings is pegged at $7.00.
Our Take
CVS Health exited the second quarter of 2024 with an earnings beat, while revenues were a miss. However, the bottom line decreased year over year, mainly due to a decline in the Health Care Benefits segment's operating results, which reflected continued utilization pressure and the unfavorable impact of the company's Medicare Advantage star ratings for the 2024 payment year within the Medicare product line. CVS narrowed down its full-year adjusted EPS guidance, reflecting the continued pressure on the Health Care Benefits segment.
On a positive note, the expansion of both margins is encouraging. The company’s innovation is accelerating more transparent pharmacy reimbursement models, increasing the use of biosimilars and improving patient outcomes through its connected healthcare delivery assets. CVS’ integrated model and strategy are helping it thrive in a challenging environment. Management is taking steps to seize many opportunities, including leadership changes in the Health Care Benefits segment.
Zacks Rank and Key Picks
CVS Health currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks from the broader medical space are Intuitive Surgical (ISRG - Free Report) , Abbott Laboratories, Inc. (ABT - Free Report) and Quest Diagnostics (DGX - Free Report) .
Intuitive Surgicalreported a third-quarter 2024 adjusted EPS of $1.78, which beat the Zacks Consensus Estimate by 16.3%. Revenues of $2.01 billion topped the consensus estimate by 2%. ISRG currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Intuitive Surgicalhas an estimated long-term earnings growth rate of 16.1% in 2024 compared with the industry’s 14.1%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 8.97%.
Abbott, carrying a Zacks Rank #2 (Buy), reported third-quarter 2024 earnings of $1.14, which surpassed the Zacks Consensus Estimate by 3.6%. Revenues of $10.38 billion topped the Zacks Consensus Estimate by 0.3%.
ABT has an estimated earnings growth rate of 10.1% for 2025 compared with the S&P 500’s 9.3%. The company surpassed earnings estimates in each of the trailing four quarters, the average being 2.34%.
Quest Diagnostics, carrying a Zacks Rank #2, reported a third-quarter adjusted EPS of $2.35, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $2.40 billion exceeded the Zacks Consensus Estimate by 0.5%.
DGX’s historical five-year earnings growth rate of 7.4% compared favorably with the industry’s 4.2%. The company surpassed earnings estimates in each of the trailing four quarters, the average being 3.31%.
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CVS Health (CVS) Beats Q2 Earnings, Narrows '24 EPS Outlook
CVS Health Corporation (CVS - Free Report) posted adjusted earnings per share (EPS) of $1.83 in the second quarter of 2024, down 17.2% year over year. However, the metric topped the Zacks Consensus Estimate by 5.2%. 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 $1.41, down 4.7% year over year.
Revenues
Revenues in the second quarter rose 2.6% year over year to $91.23 billion. However, the top line missed the Zacks Consensus Estimate by 0.4%. The year-over-year upside was primarily driven by growth in the Health Care Benefits and Pharmacy & Consumer Wellness segments.
Quarter in Detail
Health Services revenues were down 8.8% to $42.17 billion in the reported quarter. The downside was mainly due to the previously announced loss of a large client and continued pharmacy client price improvements.
The decline was partially offset by the pharmacy drug mix, increased contributions from the company's healthcare delivery assets and growth in specialty pharmacy.
CVS Health Corporation Price, Consensus and EPS Surprise
CVS Health Corporation price-consensus-eps-surprise-chart | CVS Health Corporation Quote
Total pharmacy claims processed declined 18.3% on a 30-day equivalent basis due to the previous loss of a large number of clients during the second quarter of 2024.
Revenues in CVS Health’s Pharmacy & Consumer Wellness segment were up 3.7% year over year to $29.84 billion. The upside was primarily driven by increased prescription volume and pharmacy drug mix.
Within the Health Care Benefits segment, the company registered revenues worth $32.48 billion in the second quarter, up 21.4% year over year. The upside was driven by growth in the Medicare and Commercial product lines.
Margins
Total costs fell 6.6% to $50 billion in the second quarter. The gross profit rose 16.5% to $41.24 billion. The gross margin expanded 540 basis points (bps) to 45.2%.
The adjusted operating margin in the quarter under review expanded 518 bps to 34% despite a 4.7% rise in operating expenses to $10.34 billion.
Liquidity Position
CVS Health exited the second quarter of 2024 with cash and cash equivalents of $12.51 billion compared with $9.80 billion at the end of the first quarter. The long-term debt was $62.64 billion compared with $57.69 billion at the end of the first quarter.
The cumulative net cash provided by operating activities at the end of the second quarter of 2024 was $7.99 billion compared with $13.35 billion in the year-ago period.
2024 Guidance
CVS Health provided an updated guidance.
The company expects adjusted EPS guidance for full-year 2024 in the band of $6.40-$6.65 (earlier, at least $7.00). The Zacks Consensus Estimate for 2024 earnings is pegged at $7.00.
Our Take
CVS Health exited the second quarter of 2024 with an earnings beat, while revenues were a miss. However, the bottom line decreased year over year, mainly due to a decline in the Health Care Benefits segment's operating results, which reflected continued utilization pressure and the unfavorable impact of the company's Medicare Advantage star ratings for the 2024 payment year within the Medicare product line. CVS narrowed down its full-year adjusted EPS guidance, reflecting the continued pressure on the Health Care Benefits segment.
On a positive note, the expansion of both margins is encouraging. The company’s innovation is accelerating more transparent pharmacy reimbursement models, increasing the use of biosimilars and improving patient outcomes through its connected healthcare delivery assets. CVS’ integrated model and strategy are helping it thrive in a challenging environment. Management is taking steps to seize many opportunities, including leadership changes in the Health Care Benefits segment.
Zacks Rank and Key Picks
CVS Health currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks from the broader medical space are Intuitive Surgical (ISRG - Free Report) , Abbott Laboratories, Inc. (ABT - Free Report) and Quest Diagnostics (DGX - Free Report) .
Intuitive Surgicalreported a third-quarter 2024 adjusted EPS of $1.78, which beat the Zacks Consensus Estimate by 16.3%. Revenues of $2.01 billion topped the consensus estimate by 2%. ISRG currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Intuitive Surgicalhas an estimated long-term earnings growth rate of 16.1% in 2024 compared with the industry’s 14.1%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 8.97%.
Abbott, carrying a Zacks Rank #2 (Buy), reported third-quarter 2024 earnings of $1.14, which surpassed the Zacks Consensus Estimate by 3.6%. Revenues of $10.38 billion topped the Zacks Consensus Estimate by 0.3%.
ABT has an estimated earnings growth rate of 10.1% for 2025 compared with the S&P 500’s 9.3%. The company surpassed earnings estimates in each of the trailing four quarters, the average being 2.34%.
Quest Diagnostics, carrying a Zacks Rank #2, reported a third-quarter adjusted EPS of $2.35, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $2.40 billion exceeded the Zacks Consensus Estimate by 0.5%.
DGX’s historical five-year earnings growth rate of 7.4% compared favorably with the industry’s 4.2%. The company surpassed earnings estimates in each of the trailing four quarters, the average being 3.31%.