CVS Health (CVS +13%) saw its stock jump after reporting better-than-expected Q4 earnings and revenue. The company resumed issuing guidance, projecting FY25 adjusted EPS in line with consensus, a relief given past cost-related challenges. Since CEO David Joyner took over in late October, CVS has rebounded over 35% from December lows, driven by positive trends.

• Q4 adjusted EPS was $1.19, a 9% sequential increase, with revenue up 2% sequentially and 4% year-over-year to $97.71 billion. The Health Care Benefits segment, including Aetna, led growth with a 23% year-over-year increase. Health Services, including Oak Street and Signify, dipped 4%. The Pharmacy & Consumer Wellness segment saw an 8% revenue boost, aided by higher prescription volumes.
• CEO David Joyner outlined four strategic focuses: turning Aetna around, making healthcare more affordable, investing in emerging technologies, and maintaining a strong balance sheet. Aetna aims for 3-5% target margins after challenges in 2024. CVS plans to reduce Medicare Advantage membership by a high single-digit percentage year-over-year.
• CVS leverages AI to enhance efficiency and reduce member frustration. The company remains committed to prudent financial policies, including a 4.2% annual dividend yield.
• FY25 adjusted EPS is expected to be $5.75-6.00, an 8% increase at the midpoint. However, this is a step down from FY23's $8.74, indicating a need to recover lost ground.

Cost-cutting is crucial for reaching the FY25 earnings target, with a focus on reducing the medical benefit ratio (MBR). In Q4, the MBR rose by 630 basis points year-over-year to 94.8%, mainly due to Medicare Advantage. Improving this area is vital for margin enhancement.

Despite setbacks, including store closures and challenges in the insurance division, investors are optimistic about CEO Joyner's strategy, which could drive a significant recovery.