CVS Health Struggles with 2024 Forecast

CVS Health has revised its 2024 financial forecast for the third time this year, citing ongoing struggles within its health insurance sector, particularly due to rising costs associated with its Medicare Advantage plans. The company reported a significant decline in adjusted operating income from its health benefits division, which fell 39% to $938 million, contributing to an overall profit drop of more than 7% to $1.77 billion for the quarter. The decline in quality ratings for its Medicare plans and pressures from Medicaid coverage have compounded these challenges. In addition to the setbacks in its health benefits business, CVS Health's pharmacy operations also experienced a 12% decrease in adjusted operating income. The company noted a slump in store sales, attributed in part to reduced consumer demand for COVID-19 test kits. In response to these financial pressures, CEO Karen Lynch announced a multiyear, $2 billion cost-cutting initiative aimed at stabilizing the company’s finances. CVS Health is also in the process of completing a three-year plan to close 900 stores, having already shuttered 851 locations. The company’s latest earnings report revealed adjusted earnings of $1.83 per share on $91.2 billion in revenue, falling short of analysts' expectations. The revised earnings forecast has dropped significantly from earlier projections made in December and May, reflecting the company's ongoing struggles in a challenging healthcare landscape. As a result of these financial difficulties, CVS Health's stock has plummeted by a quarter this year, contrasting sharply with the broader market, where the Standard & Poor’s 500 index has risen approximately 10%.