CVS Health raises annual profit forecast as turnaround gathers steam
(Reuters) - CVS Health raised its full-year profit forecast on Thursday following strong performance across its businesses, signaling an early recovery after a series of troubles hit the healthcare conglomerate last year.
Shares of the company jumped 8.4% to $72.30 in premarket trading.
The shares fell over 40% last year due to weak performance in the company's insurance and pharmacy businesses and multiple cuts to its profit outlook, but have pared most of those losses this year following a better-than-expected earnings report in February.
CEO David Joyner, who took the helm in October, has laid out cost-cutting plans and reshuffled top management positions to help the company navigate one of the most challenging periods in its six-decade history.
On Thursday, CVS Health's adjusted quarterly profit again beat estimates, as the company spent less on its members' medical care than Wall Street had expected, a likely relief for investors after UnitedHealth cut its forecast last month, citing elevated costs.
The company said it would exit the individual exchange business, where it sells plans directly to individuals through Obamacare exchanges -- its latest effort to streamline operations.
CVS' pharmacy benefit management unit also plans to drop Eli Lilly's weight-loss drug Zepbound as a preferred product from its list of drugs eligible for reimbursement, and would retain Novo Nordisk's Wegovy. "Zepbound will be excluded on July 1, and our clients will save a significant amount of money in this therapy class," a CVS spokesperson said.
CVS' medical loss ratio, or the percent of premiums spent on patient care, fell to 87.3% from 90.4% a year ago, below analysts' expectations of 88.9%, according to estimates compiled by LSEG.
Health insurers have been facing increased medical costs for the past two years, driven by high healthcare demand among older adults enrolled in Medicare Advantage plans.
CVS earned $2.25 per share in the first quarter ended March 31, compared with analysts' average estimate of $1.70.
It raised its adjusted full-year profit forecast to $6 to $6.20 per share from $5.75 to $6 previously.
Revenue from its pharmacy unit of $31.91 billion beat estimates of $30.96 billion. Its health services unit brought in revenue of $43.46 billion, also above estimates of $43.30 billion.
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