CVS Health (CVS, Financial), the largest drug retailer in the United States, has announced significant leadership changes and released preliminary third-quarter results that fell short of expectations. David Joyner has been appointed as the new CEO, succeeding Karen Lynch. Joyner, a long-term CVS executive, began his new role following a period marked by unmet profit targets, which had frustrated shareholders and attracted public scrutiny.
The preliminary results revealed adjusted earnings per share for the third quarter ranging between $1.05 and $1.10, significantly below the market expectation of $1.70. The company also withdrew its 2024 earnings guidance, citing ongoing pressures from rising medical costs within its healthcare benefits division. Notably, the medical loss ratio for this segment is expected to reach 95.2% for the third quarter, surpassing Wall Street expectations. Additionally, the results indicated an underfunded reserve of $1.1 billion for premium deficiencies to cover excess medical expenses.
CVS Health’s stock dropped over 11% in pre-market trading following the announcement. The stock has declined 20% so far this year, in contrast to the S&P 500's rise of 22%. The company, pressured by increasing healthcare costs from its Aetna insurance subsidiary, has been reviewing strategic options, including potential spinoffs. Hedge fund Glenview Capital Management has engaged with CVS regarding business support.
Since Karen Lynch took over as CEO in February 2021, CVS Health's stock has fallen roughly 10%. Lynch faced challenges in transforming CVS into a comprehensive healthcare provider amidst government spending cuts, increased insurance costs, and post-pandemic pressures on retail operations. According to Roger Farah, who has been appointed as executive chair of the board, the decision to replace Lynch was made by the board as they believed it was the right time for change. Joyner’s extensive experience with CVS’s diverse business operations is expected to help tackle industry challenges more effectively.
David Joyner began his career at Aetna as an employee benefits representative and recently served as Executive Vice President of CVS Health and President of CVS Caremark, overseeing pharmacy services for employers, health plans, and government entities.
