CVS Health Cuts 2024 Profit Forecast Due to Increasing Medical Costs
Concerns Over Profit Forecast and Rising Medical Costs
CVS Health recently lowered its adjusted profit forecast for 2024, citing an increase in medical procedures among older adults in the United States. The surge in medical care costs in its insurance business during the fourth quarter prompted the revision.
Positive Fourth-Quarter Results and Share Price Increase
Despite the adjustments to its profit forecast, the company surpassed Wall Street’s expectations for fourth-quarter profit. The strength in its drugstores and pharmacy benefits management unit led to an increase in its shares by over 3% in morning trading, reaching $76.26.
Impact of Medical Procedures on Healthcare Conglomerates
The spike in medical procedures towards the end of the year, particularly among those enrolled in Medicare Advantage plans, has affected healthcare conglomerates like CVS and rival Humana. Outpatient procedures for individuals aged 65 and older, as well as those with disabilities, resulted in higher costs for CVS’s Aetna Medicare Advantage plans.
Rise in Healthcare Costs and Impact on Profit Forecasts
The increase in various medical services, including surgeries, dental work, and vaccinations, led to a rise in CVS’s medical benefit ratio in the fourth quarter. This trend has prompted the company to adopt a cautious stance in its profit forecast until industry-wide trends become clearer.
Investor Response and Future Outlook
Despite a slight revision in its 2024 profit outlook, investors remain optimistic about CVS’s future prospects. The company’s more diversified portfolio, compared to its Medicare-focused rival, has instilled confidence in investors. CVS is targeting low double-digit percentage growth in adjusted earnings per share in 2025 over its updated 2024 forecast.
Financial Performance and Growth Targets
CVS’s adjusted earnings per share in the fourth quarter exceeded Wall Street estimates, signaling a positive trajectory for the company. Furthermore, CVS aims to achieve at least $8.30 per share in 2024, reflecting potential challenges in managing elevated medical costs.
