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
-
What to Do When Your ETF Closes -
How Amazon Stock Became a Member of the 100,000% Return ClubAmazon's wide moat is one reason it has generated a 100,000%-plus return for investors over the long haul.
-
Are You a High-Income Earner? Three Unexpected Reasons to Save More Than You Think You ShouldHigh-income earners sometimes put off saving because they think they have plenty of time and money to do it later. That's not always the case, though.
-
How Financial Professionals Can Empower Their Female ClientsThese three strategies can help advisers better serve women as they navigate unique financial challenges and build confidence.
-
Student Visas: Older Americans' Ticket to Living in EuropeDo you envision strolling about Europe, a book in one hand, a glass of wine in the other? You could make that happen by studying there, even if you're older.
-
Three Reasons It May Be Time for an Annuity 'Refresh'Because of higher interest rates, inflation and newer annuity products, you could get a better deal today. Don't wait, though: Interest rates could start falling.
-
McDonald's Stock: How Small Changes Have Led to 100,000% ReturnsMcDonald's incremental operating improvements have added up over the years, sending the company's long-term profitability soaring.
-
Three Common Cash Flow Mistakes and How to Fix ThemBetter cash flow management could have a bigger impact on your retirement savings than simply making more money. Here's how to manage that.
