Q124 CVS earnings

Revenues: Approximately $88 billion, an increase of about 4% over the prior year’s quarter.
Adjusted Operating Income: Approximately $3 billion.
Adjusted EPS: $1.31, which fell short of expectations.
Cash Flow from Operations: $4.9 billion, a decrease from the previous year, primarily due to the timing of Medicare payments.
Health Care Benefits Segment Revenues: Approximately $32 billion, an increase of about 25% year-over-year.
Medical Membership: 26.8 million, up 1.1 million members sequentially.
Adjusted Operating Income for Health Care Benefits: $732 million, reflecting a higher medical benefit ratio.
Medical Benefit Ratio: 90.4%, up 580 basis points from the prior year quarter.

2024 Adjusted EPS Guidance: Lowered to at least $7.
Health Care Benefits Adjusted Operating Income: Revised to at least $3.6 billion, down from at least $5.4 billion.
2024 Medical Benefit Ratio Expectation: Approximately 89.8%, an increase of 210 basis points from prior guidance.
Health Services 2024 Adjusted Operating Income: Updated to at least $7 billion, a decrease of about $400 million.
Pharmacy & Consumer Wellness 2024 Adjusted Operating Income: Expected to remain at least $5.6 billion.
2024 Share Count: Expected to be approximately 1.265 billion shares.
2024 Adjusted Tax Rate: Approximately 25.6%.
2024 Cash Flow from Operations: Revised to at least $10.5 billion.
Long-Term Medicare Advantage Margin Target: Aiming for 4% to 5% margin in 3 to 4 years.

Medicare Advantage Pressures: Significant utilization pressures were experienced, impacting financial results.
Cyberattack on Change Healthcare: Impaired visibility and necessitated a $500 million reserve for estimated unprocessed claims.
Market Environment: Faced with elevated outpatient services and supplemental benefits costs, as well as new pressures in inpatient and pharmacy categories.
Medicare Advantage Profitability: Committed to improving margins despite challenges, including insufficient rates and changes prescribed by the Inflation Reduction Act.
Biosimilars Market Initiatives: Significant progress with biosimilar Humira prescriptions, highlighting strength in CVS Caremark, CVS Specialty, and Cordavis businesses.
Consumer Demand: Noted softening in an uncertain macroeconomic environment but highlighted growth in pharmacy share and interest in new pharmacy models.
Enterprise Productivity: Accelerated initiatives to streamline and optimize operations.
Star Ratings Impact: Improved Star Ratings could provide a $700 million tailwind in 2025 depending on membership retention levels.

Karen Lynch: “Despite the recent challenges in Medicare Advantage, we firmly believe the program can remain a compelling offering for seniors and a very attractive business for Aetna and CVS Health over time.”
Tom Cowhey: “Our Health Services segment generated revenue of approximately $40 billion, a decrease of nearly 10% year-over-year… This decrease was partially offset by pharmacy drug mix, growth in specialty pharmacy and the acquisitions of Oak Street Health and Signify Health.”
Karen Lynch on Future Outlook: “The current environment does not diminish our opportunities, our enthusiasm, or the long-term earnings power of our company.”