© Reuters. FILE PHOTO: CVS Health logo is seen displayed in this illustration taken, May 3, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
By Khushi Mandowara and Bhanvi Satija
(Reuters) -CVS Health Corp lowered its 2024 adjusted profit outlook on Wednesday due to higher-than-expected medical costs and expenses related to the integration of its recently acquired businesses.
The company also withdrew its 2025 adjusted earnings per share forecast of $10, sending its stock down more than 1% in early trading.
CVS now expects 2024 profit between $8.50 and $8.70 per share, compared with its previous forecast of about $9 per share, CFO Shawn Guertin said on a conference call.
The company has been expanding beyond health insurance and pharmacies with its buyouts of primary-care provider Oak Street Health and home healthcare services firm Signify Health.
CVS maintained its 2023 adjusted profit forecast at $8.50 to $8.70 per share, but said it expects its medical benefit ratio — the percentage of claims paid to premiums collected — to be at the higher end of its outlook of 84.7% plus or minus 50 basis points.
“Our 2023 guidance now prudently assumes that these medical cost trends will remain elevated for the rest of 2023,” Guertin said.
Larger rivals UnitedHealth Group (NYSE:) and Elevance Inc have also cautioned of a spike in medical costs this year after a rise in demand for elective surgeries such as hip and knee replacements rose, which older patients at higher risk of COVID had delayed during the pandemic.
The comments from the conference call overshadowed CVS’ better-than-expected second-quarter profit and its restructuring efforts.
The company recorded a $496 million restructuring charge and said it would eliminate 5,000 non-customer-facing roles.
Excluding items, CVS reported a quarterly profit of $2.21 per share, above analysts’ average estimate of $2.11 per share.