- Adjusted Earnings Per Share (EPS): $1.83
- Adjusted Operating Income: $3.7 billion
- Total Revenues: More than $91 billion
- Operating Cash Flow (First Half of the Year): $8 billion
- Full Year 2024 Adjusted EPS Guidance: $6.40 to $6.65
- Healthcare Benefits Revenue: Over $32 billion
- Healthcare Benefits Adjusted Operating Income: Nearly $1 billion
- Medical Membership: Nearly 27 million
- Medical Benefit Ratio (MBR): 89.6%
- Pharmacy and Consumer Wellness Revenue: Approximately $30 billion
- Pharmacy and Consumer Wellness Adjusted Operating Income: $1.2 billion
- Retail Pharmacy Share: Approximately 27.2%
- Store Closures: 851 stores closed to date, on track to close 900 by year-end
- Health Services Revenue: More than $42 billion
- Health Services Adjusted Operating Income: $1.9 billion
- Pharmacy Claims Processed: Approximately 471 million
- Signify Revenue Growth: 27% year-over-year
- Oak Street Revenue Growth: 32% year-over-year
- Oak Street Centers: 207 centers, an increase of 30 year-over-year
- Same-Store Pharmacy Sales: Up over 9% year-over-year
- Same-Store Prescription Volumes: Increased by 6.5%
- Same-Store Front Store Sales: Down by about 4% year-over-year
- Cash Flow from Operations (Year-to-Date): Approximately $8 billion
- Cash at Parent and Unrestricted Subsidiaries: Approximately $2.9 billion
- Full Year 2024 Cash Flow from Operations Guidance: Approximately $9 billion
Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CVS Health Corp (CVS, Financial) reported adjusted earnings per share of $1.83 and adjusted operating income of $3.7 billion for the quarter.
- Total revenues exceeded $91 billion, with $8 billion in operating cash flow generated in the first half of the year.
- The company expanded the number of consumers accessing two or more CVS Health offerings to 57.7 million, an increase of nearly 2.5 million consumers.
- CVS Health Corp (CVS) signed CVS CostVantage agreements with eight pharmacy benefit managers, covering more than 50% of their commercial scripts.
- The Health Services segment generated revenues of more than $42 billion and delivered $1.9 billion in adjusted operating income.
Negative Points
- The Health Care Benefits segment underperformed, leading to leadership changes and a revised adjusted EPS guidance range of $6.40 to $6.65.
- Medical cost trends in the Medicare Advantage business remained elevated, impacting the medical benefit ratio and overall financial performance.
- The company experienced a significant increase in the final 2023 risk adjustment for the individual exchange business, leading to a $225 million accrual.
- CVS Health Corp (CVS) saw a decline in same-store front store sales by about 4% compared to the same quarter last year, reflecting general softening of consumer demand.
- The company is facing continued pharmacy reimbursement pressure and the impact of recent generic introductions, which affected the pharmacy and consumer wellness segment.
Q & A Highlights
Q: Can you talk about the level of visibility you have regarding cost trends in the Health Benefits business and how these trends were captured in the 2025 bid?
A: We have a high degree of confidence that we captured the trend for 2025 bids. We took a very prudent approach, expecting elevated trends for the rest of the year and into next year. We feel confident in achieving the 100 to 200 basis points of margin recovery. (Karen Lynch, CEO)
Q: What are the key headwinds and tailwinds for achieving double-digit EPS growth in 2025?
A: We aim for double-digit EPS growth and will provide detailed guidance later. Key factors include strong performance in Health Services and Pharmacy segments, significant price increases in the individual business, and cost savings initiatives. We also expect improvements in Medicare Advantage margins and Medicaid pricing. (Thomas Cowhey, CFO)
Q: Can you provide an update on the CVS CostVantage negotiations with PBMs?
A: We have signed agreements with eight PBMs and are making progress with others. The goal is to transition all commercial contracts to CVS CostVantage by January 1, 2025, to ensure pharmacies are reasonably compensated. (Brian Kane, EVP and President of Aetna)
Q: How is CVS responding to the FTC's interim study on PBMs?
A: We fundamentally disagree with the FTC's position. PBMs play a crucial role in reducing drug costs. We are leading the industry with our TrueCost offering, ensuring greater transparency and affordability for consumers. (Karen Lynch, CEO)
Q: What are the expected impacts of the Part D demonstration program on CVS?
A: We are pleased with the Part D demonstration program, which aims to stabilize premiums. We have applied for the demonstration and believe it will help mitigate risks in the Part D marketplace. (Karen Lynch, CEO)
Q: How will the leadership changes at Aetna impact the business?
A: The financial performance of the Health Benefits segment was not meeting expectations, leading to leadership changes. The focus will be on driving execution and improving financial and operational performance. (Karen Lynch, CEO)
Q: How confident are you in the revised guidance for 2024?
A: We have incorporated prudence into our outlook, considering elevated medical cost trends and potential risks in Medicaid and individual exchange businesses. We believe the revised guidance reflects a realistic assessment of the current environment. (Thomas Cowhey, CFO)
Q: What steps is CVS taking to address the negative perception of PBMs on Capitol Hill?
A: We are actively educating Congress about the role of PBMs in reducing drug costs. We have demonstrated significant savings and are leading the industry in pricing transparency with our TrueCost model. (Karen Lynch, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
