CVS Health (CVS) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue rose 6.3% year-over-year to $95.4 billion, driven by growth in Health Care Benefits and Pharmacy & Consumer Wellness, partially offset by a decline in Health Services.

• Adjusted EPS was $1.09, with GAAP EPS at $0.07, reflecting $1.1 billion in premium deficiency reserves and $1.2 billion in restructuring charges.

• Net income dropped 96% to $87 million, and operating income fell 77.5% to $832 million due to higher utilization and restructuring.

• Year-to-date cash flow from operations totaled $7.2 billion, down from the prior year.

• Leadership changes and integration of recent acquisitions aim to address performance and drive operational improvements.

Financial highlights

• Q3 2024 revenues were $95.4 billion (+6.3% YoY); adjusted operating income was $2.5 billion, down from $4.46 billion last year.

• Health Care Benefits revenue grew 25.5% to $33.0 billion, but posted an adjusted operating loss of $924 million due to high utilization and premium deficiency reserves.

• Health Services revenue declined 5.9% to $44.1 billion, but adjusted operating income rose 17.4% to $2.2 billion.

• Pharmacy & Consumer Wellness revenue increased 12.3% to $32.4 billion, with adjusted operating income up 14.9% to $1.6 billion.

• Cash flow from operations for the nine months ended September 30, 2024, was $7.2 billion.

Outlook and guidance

• No formal 2024 guidance provided due to ongoing utilization pressures; premium deficiency reserves of $1.1 billion are expected to be substantially released in Q4 2024.

• 2025 is expected to be a transition year, with margin recovery in Medicare Advantage and individual exchange businesses due to benefit and pricing changes.

• Membership in individual exchange could shrink 20%-25% in 2025 due to rate increases.

• Multi-year cost savings initiative expected to generate over $500 million in 2025.

• Regulatory and market uncertainties, including PBM legislation and government program funding, remain key risks.