MW CVS's stock soars after a big profit beat, continued improvement in PBM business

By Tomi Kilgore

Health-services revenue, which includes the PBM drug 'middleman' business, fell again amid price improvements, but topped expectations

Shares of CVS Health Corp. soared in early trading Wednesday, after the drugstore chain and healthcare-services company beat quarterly profit expectations by a wide margin as the under-fire pharmacy-benefit-manager business continued to show improvement.

Revenue in the company's health-services division, which includes the CVS Caremark PBM business, saw the pace of the decline in revenue slow for the fourth-straight quarter, as pharmacy drug mix and growth in specialty pharmacy helped offset pharmacy client price improvements and the previously announced loss of a large client.

Also read: CVS's stock seeing worst month in decades as drug seller gets criticism from both parties.

The stock $(CVS)$ shot up 11.3% toward a three-month high in premarket trading, enough to top the S&P 500 index's SPX gainers ahead of the open.

Net income for the quarter to Dec. 31 fell to $1.64 billion, or $1.30 a share, from $2.05 billion, or $1.58 a share, in the same period a year ago, amid continued pressure from the drop in its Medicare Advantage star rating.

Excluding nonrecurring items, adjusted earnings per share fell to $1.19 from $2.12 but was above the FactSet consensus of 91 cents. The margin of that beat - 31% - was the widest since EPS beat by 37% in the second quarter of 2020.

Total revenue grew 4.2% to $97.71 billion, above the FactSet consensus of $97.09 billion.

Health services revenue declined 4.3% to $47.02 billion, but exceeded the FactSet consensus of $44.45 billion. Revenue had seen year-over-year declines of 5.9%, 8.8% and 9.7% in the previous three quarters.

Pharmacy claims decreased 16.9%, due to the loss of the large client.

Healthcare-benefits revenue jumped 23.3% to $32.96 billion, to top expectations of $32.88 billion, even as the business swung to an adjusted operating loss of $439 million from a profit of $676 million.

The medical-benefit ratio, a measure of profitability of the insurance business - lower is better - climbed to 94.8% from 88.5%, for reasons including increased utilization, the drop in the company's Medicare Advantage star ratings and increased severity of patients' conditions under the Medicaid business.

The pharmacy and consumer-wellness division booked revenue of $33.51 billion, up 7.5% from a year ago and above expectations of $33 billion, boosted by a more favorable pharmacy drug mix and increased prescription volume.

Prescriptions filled rose 3.3%, while same-store prescription volume from stores open at least a year, increased 5.9%.

Looking ahead, the company expects 2025 adjusted EPS of $5.75 to $6.00, which surrounds the current FactSet consensus of $5.86.

CVS's stock has gained hiked up 22.5% so far this year, after plunging 43.2% in 2024 to suffer its worst year since 2001. In comparison, the S&P 500 has tacked on 3.2% year to date after rallying 23.3% last year.

-Tomi Kilgore

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February 12, 2025 08:07 ET (13:07 GMT)

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