CVS Posts Better-Than-Expected Earnings, Despite Higher Medical Costs Hurting Insurance Unit

CVS Health made a nice profit in the fourth quarter, surpassing estimates from analysts. CVS’ three business units — insurance, health services, and pharmacy — did better than Wall Street predicted.

CVS brought in $97.71 billion in total revenue by the end of Q4 2024, a 4.2% jump from the same period the year prior. Reported revenue beat expectations of $97.19 billion.

Net income came in at $1.30 per share on $1.64 billion in net income. However, the results were lower than Q4 2023’s $2.05 billion, or $1.58 per share.

According to the drugstore chain, higher medical costs related to its insurance business dragged down its financials in the fourth quarter. Lower Medicare Advantage ratings, which help patients compare Medicare and drug plans, also hurt the numbers.

CVS also blamed higher medical costs and poor Medicare Advantage ratings when it reported disappointing earnings in the second quarter of 2024. While revenue was up in Q2, net income plummeted.

CVS Earnings for Its 3 Divisions

In Q4, revenue for CVS’ health services unit reached $47.02 billion, which is nearly $3 billion more than analysts were anticipating. Compared to 2023’s fourth quarter, revenue was down 4%. Pharmacy claims fell to 499.4 million, roughly 100 million less than the year before.

Sales for the company’s pharmacy and consumer wellness segment climbed 7% to $33.51 billion. Wall Street was looking for $33.03 billion. Higher prescription volume generated the reported uptick in sales. Yet, various other factors, like lower volume of retail store items, new generic drugs, and drug reimbursement issues, put pressure on the unit’s overall revenue.

Increasing 23% year-over-year, CVS’ insurance unit brought in $32.96 billion in revenue, narrowly beating analysts’ projections of $32.89 billion. Nonetheless, the division reported an adjusted operating loss of $439 million, substantially worse than the positive income of $676 million for the last quarter of 2023.

“We have continued to see growth in key areas of our business, including the Pharmacy and Consumer Wellness segment, while we address the industry-wide challenges that have impacted our Health Care Benefits segment,” noted CVS Health CEO David Joyner in the earnings statement.