CVS profits: (CVS) share rises
The CVS Pharmacy Logo will be on a sign on February 7, 2024 over a CVS Health Corp. -business in Las Vegas, Nevada.
Patrick T. Fallon | AFP | Getty pictures
After a dark 2024, CVS health Could turn around.
Some investors seem to be convinced, especially after the retail drug chain on Wednesday had a large beat on the result of the fourth quarter and a profit view of 2025, which met expectations.
In contrast to the main rivals of the retail pharmacy, the CVS shares have now increased by more than 45% Walgreenswhose share has increased by almost 3%. Shares of other insurers Unitedhealth Group And Cigna have increased by about 4% or almost 8%.
The optimistic quarterly results can be a sign that brighter days are in front of them for the résumé – or at least that things may not be as bad as last year.
The company's share fell by more than 40%in 2024 after it had missed the profit estimates in three quarters and withdrawn its annual forecast, above all to the higher than expected medical costs in its insurance unit and other problems such as the reimbursement pressure of pharmacies.
CVS is not yet out of the forest. The medical costs were less serious in the fourth quarter, but will probably be increased in 2025, since more seniors flow into hospitals and medical practices and use more health services.
However, some analysts are more optimistic about the company's ability to deal with these challenges and to achieve the adjusted profit prospects of $ 5.75 to 6 per share. CVS has followed the closure of the shop closures and other cost cuts, and his new CEO David Joyner has spent a large part of his first 100 days at the top in order to concentrate on the company's insurance unit.
“The pieces are available for [CVS to return] From the low point of the operating performance, “said the analyst of Leerink Partners, Michael Cherny, who improved the share on Wednesday after the results.
Cantor Fitzgerald Analysts also improved the inventory of CVS on Wednesday, whereby “increased trust in a successful turn” was listed.
Insurance business suffer
CVS has already taken steps to calculate his insurance business that includes plans for the Affordable Care Act, Medicare Advantage and Medicaid as well as dental and vision. The company left certain unprofitable health plans in 2024 and increased the premiums to register fewer members this year.
In a research note, Cantor Fitzgerald's analysts said that they were “incrementally safer” that CVS will improve margins in his Medicare Advantage business and return to “normal levels” by 2027.
CVS has announced that the Medicare Advantage business be returned to a margin of 3% to 5%. They were in the range of 4.5% to 5% at the end of 2024, said CVS CFO Tom Cowhey during a win on Wednesday.
CVs and other insurers such as Unitedhealth Group and Humana have spanned medical costs last year, since more Medicare advantages return to patients in hospitals to delay procedures that they delay during pandemic.
Medicare Advantage, a private health insurance plan from Medicare, has long been a driver for growth and profits for insurers. However, investors are concerned about the outlier costs associated with these plans, which cover more than half of all Medicare beneficiaries.
In order to improve margins, the company plans to reduce the membership of Medicare Advantage due to a “high single -digit percentage” from the end of 2024, the managers announced on Wednesday. Aetna had 4.4 million Medicare Advantage members in December, after the publication of the fourth quarter in the fourth quarter compared to 3.5 million in the previous year.
Overall, CVS executives stated that more than 1 million are reduced this year, including 800,000 on the individual market by more than 1 million. Patients who lose insurance can enroll for a new Medicare advantage plan or join traditional Medicare plans.
Aetna also achieved better Medicare Advantage star reviews for the payment year 2025, which should increase its federal payments in 2026. These crucial reviews help the patients to compare the quality of Medicare Health and Medicine Plans and to determine how much an insurer receives in bonus payments from the centers for Medicare & Medicaid services.
CVS Health Corp. In 2018 Aetna Inc. acquired in Hartford.
Brad Horrigan | Hartford Courant | Getty pictures
At the request for earnings, Joyner said that the company was calling for the Medicare government to have higher payment rates. He said the proposed interest rates for 2026 do not make any higher medical costs last year.
The bidders in January proposed to increase the reimbursement rates of Medicare Advantage by 2.2% in 2026, which rose 0.2% this year. However, the Cantor analysts also stated that the reimbursement rate of Medicare could increase and predict a final increase from 2% to 2.8%.
“We take an improvement rate to … Star evaluations to maintain and [medical] Cost trends that do not exceed 2024 levels, ”the analysts wrote.
It is difficult to predict what the medical cost trends in the insurance industry will look like in 2025. This time, higher medical costs are integrated into the entire annual instructions of the CVS.
The outlook assumes that the trends that the company saw in 2024 will be broadcast this year despite the cheaper medical costs for the company in the fourth quarter, said Tanquilut.
“The early readings for '25 or at least late '24 is that it starts to get better. But they did not assume that improvement in the instructions in 2025,” Tanquilut told CNBC. “So it sounds like your numbers for 2025 have advantages.
The company also announced last year that there would be significant changes to its Medicare advantage plans for 2025, e.g. B. the increase in copays and premiums and the reduction of certain health benefits. This eliminates the costs bound with these advantages and drive away patients they need or want.
Other insurers such as Humana, the second largest Medicare Advantage insurer, clubs their planned offers for 2025 in a similar way to reduce membership with lower profits. Humana releases astonishing 550,000 Medicare Advice customers in less profitable markets. However, the company has announced that people who lose access to their existing plans will probably have a further option of Humana Medicare Advantage.
CVS shares exceed competitors
The Walgreens business on November 28, 2024 on 3646 N. Broadway in Chicago.
Antonio James | Chicago Tribune | Tribune News Service | Getty pictures
CVS shares exceed most of its competitors in healthcare both at the insurance and retail pharmacies. The analyst of Jefferies, Brian Tanquilut, said that this is probably due to the unique position of CVS as a company that has a health insurer, a retail droger chain and a pharmacy benefit manager or PBM called Caremark.
“I think what you start to show is true synergy … if you have all three assets,” said Tanquilut.
PBMs like Caremark are at the center of the pharmaceutical supply chain in the USA, negotiate drug discounts with manufacturers on behalf of insurers, create lists of preferred medication that are covered by health plans and pharmacies are refunded for recipes.
This means that Caremark also sits at the interface of the retail pharmacy operation of the CVS and its Aetna insurer and increases the competitive advantage of both companies.
For example, Caremark directs drug recipes on CVS single -trade pharmacies in some cases. This has helped the company's drugstores to win an important market share of prescription market for its main competitor Walgreens, who tried to work as a largely independent pharmacy company, said Tanquilut.
Other insurers such as Cigna and Unitedhealth Group also have PBMS. But the fact that CVS has a retail pharmacy “pulls everything together and distinguishes them from the others,” added Tanquilut.
This does not necessarily mean that other insurers are below average. Tanquilut said, Unitedhealthcare, the Unitedhealth Group's insurance arm, is still “best class” in the industry.
Other insurance companies have their own hurdles, apart from higher medical costs, such as Humana A decline in his Medicare Advantage Star reviews for the year.
However, the history of CVS was much more complicated than other insurers in view of its business model, and the company could now reach a point where “all three business segments click,” said Tanquilut.
