CVS Health books strong 3Q but the health care giant preaches caution on next year

CVS Health beat third-quarter forecasts thanks partially to its growing pharmacy benefits management side, but the health care giant is cautious about next year.

Interim Chief Financial Officer Tom Cowhey told analysts Wednesday that it would be “prudent for investors to ground their expectations” for adjusted earnings at the low end of a range of $8.50 to $8.70 per share. That’s also what the company expects for full-year earnings this year.

CVS Health operates one of the nation’s largest drugstore chains with more than 9,000 locations. It runs prescription drug plans for big clients like insurers and employers through a large pharmacy benefit management business.

It also provides health insurance for more than 25 million people through its Aetna arm.

Company leaders often give some initial thoughts on what they expect in the next year during third-quarter earnings calls. Cowhey said CVS Health should see growth from its core business in 2024 and reap savings from a previously announced cost-cutting program.

But a decline in ratings for its Medicare Advantage health insurance plans will hurt that business, which also will continue to see rising care use.

Medicare Advantage plans are privately run versions of the federal government’s Medicare program mostly for people age 65 and older. More seniors appear to be getting surgeries and other health care procedures now that the COVID-19 pandemic has faded, Edward Jones analyst John Boylan said in a research note.

Other insurers like UnitedHealthcare started highlighting that trend earlier this year.

“Elevated surgery rates won’t last forever, but costs are higher than we thought and could last slightly longer than our original forecast,” Boylan said.

In the third quarter, CVS said growth across across all product lines pushed total quarterly revenue up more than 10% to $89.76 billion, easily topping Wall Street expectations, according to a survey of analysts by Zacks Investment Research.

CVS Health turned a $2.26 billion profit after reporting a loss of more than $3 billion last year when it set aside money to cover a potential opioid litigation deal.

Earnings in this year’s quarter, adjusted for one-time gains and costs, came to $2.21 per share. That also was better than the $2.13 that Wall Street expected.

Revenue from the company’s pharmacy benefit management side grew 8% to $46.89 billion. CVS Health also saw its health insurance enrollment grow nearly 6% year-over-year, even though the company started losing customers from the Medicaid plans it manages for states earlier this year.

CVS Health also filled more prescriptions at its drugstores but saw store sales in areas outside the pharmacy slip.

The company laid out a cost-cutting program earlier this year, and CEO Karen Lynch said Wednesday that they had closed 564 of the 900 locations they planned to shutter.

Shares of Woonsocket, Rhode Island-based CVS Health Corp. slipped 54 cents to $68.47 in midday trading Wednesday while broader indexes rose slightly.

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A portion of this story was generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on CVS at https://www.zacks.com/ap/CVS