CVS Health (CVS) stock plummeted more than 18% at the start of Wednesday's trading session after the pharmacy chain disclosed weaker-than-expected earnings and revenue for its first quarter and slashed its full-year outlook.
In the three months ended March 31, CVS reported revenue of $88.4 billion, an increase of 3.7% from the year-ago period. The gain was driven by 24.6% top-line growth in the company's Health Care Benefits segment, to $32.2 billion.
However, earnings per share (EPS) decreased 40.5% year-over-year to $1.31. This was due primarily to a declines in operating income for its Health Care Benefits business as a result of rising medical costs associated with its Medicare Advantage plans.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"The current environment does not diminish our opportunities, enthusiasm, or the long-term earnings power of our company," CVS CEO Karen Lynch said in a statement. "We are confident we have a pathway to address our near-term Medicare Advantage challenges."
The quarterly results fell well short of analysts' expectations. According to CNBC, Wall Street was calling for revenue of $89.2 billion and earnings of $1.69 per share.
As a result of the weak performance in the first quarter and the company "recognizing the potential for continued elevated medical cost trends in the remainder of 2024," CVS lowered its full-year outlook. It now anticipates earnings per share of at least $7.00, down from its previous guidance of at least $8.30 per share. Cash flow from operations is forecast to be at least $10.5 billion, down from its previous guidance of at least $12 billion.
"We remain committed to our strategy and believe that we have the right assets in place to deliver value to our customers, members, patients, and shareholders," Lynch said.
Is CVS stock a buy, sell or hold?
The earnings-related setback has yet to phase analysts who are very bullish on the healthcare stock.
According to S&P Global Market Intelligence, the consensus analyst target price for CVS stock is $87.96, representing implied upside of more than 56% to current levels. Additionally, the consensus recommendation is Buy.
Related Content
-
13 Answers to Pressing Social Security QuestionsFrom smart claiming strategies for couples to tips on maximizing your monthly check, we have advice that can help you.
-
Keep Tax Collectors at Bay with Muni Bond FundsMunicipal bonds can be good insurance against inflation — and interest is tax-free. But as with all investments, understanding risk is key.
-
Keep Tax Collectors at Bay with Muni Bond Funds
Municipal bonds can be good insurance against inflation — and interest is tax-free. But as with all investments, understanding risk is key.
-
Eight Tips From a Financial Caddie: How to Keep Your Retirement on the FairwayThink of your financial adviser as a golf caddie — giving you the advice you need to nail the retirement course, avoiding financial bunkers and bogeys.
-
Just Sold Your Business? Avoid These Five Hasty MovesIf you've exited your business, financial advice is likely to be flooding in from all quarters. But wait until the dust settles before making any big moves.
-
Cord Cutting Could Help You Save Over $10,000 in 10 YearsHow cutting the cord can save you money and how those savings can grow over time.
-
Should I Buy Stocks or Should I Buy Bonds Right Now?Generally speaking, stocks provide reasonable growth while bonds provide stable income. Each play important roles in diversified portfolios.
-
You Were Planning to Retire This Year: Should You Go Ahead?If the economic climate is making you doubt whether you should retire this year, these three questions will help you make up your mind.
-
Are You Owed Money Thanks to the SSFA? You Might Need to Do Something to Get ItThe Social Security Fairness Act removed restrictions on benefits for people with government pensions. If you're one of them, don't leave money on the table. Here's how you can be proactive in claiming what you're due.
-
From Wills to Wishes: An Expert Guide to Your Estate Planning PlaybookConsider supplementing your traditional legal documents with this essential road map to guide your loved ones through the emotional and logistical details that will follow your loss.
