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CVS Health Just Beat Expectations and Raised Some

By Cory Renauer – Feb 12, 2020 at 11:52AM

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The growing healthcare conglomerate outperformed forecasts in the fourth quarter, and boosted its outlook for the year ahead.

Shares of CVS Health (CVS -1.66%) ticked up on Wednesday morning after the company reported fourth-quarter earnings that exceeded Wall Street expectations and management's own targets.

The first year following its acquisition of Aetna was a good one for the company, and 2020 could be even better. The growing healthcare conglomerate raised its guidance for 2020 from the levels it set in June. 

Pharmacist at work.

Image source: Getty Images.

In the numbers 

During the fourth quarter, CVS Health reported $66.9 billion in total revenue, $2.9 billion more than analysts' consensus estimate. On the bottom line, adjusted earnings per share reached $1.73, which was $0.04 higher than the analysts' average prediction.

CVS Health's pharmacy benefits management business processed 10.2% more claims than during the prior-year period, but generic drug pricing pressure limited its revenue growth to 6.2%. CVS Health's retail segment processed 5.6% more prescriptions, but reimbursement pressure held revenue growth to 2.5%.

The health insurance operation that CVS Health acquired from Aetna had 22.9 million members in the fourth quarter, but it produced just 21% of total operating income that rose 1.3% to $3.8 billion during the period. The amount spent providing care worked out to 85.7% of premiums collected, which is pretty good, but not as impressive as the 82.6% medical benefit ratio that UnitedHealth Group recorded during the fourth quarter.

CVS Health's plan to leverage its colossal retail footprint will accelerate in 2020. The company expects to have between 600 and 650 HealthHUB locations that allow patients to manage chronic diseases, fill prescriptions, and do a little shopping before quickly getting on with their lives.

Cory Renauer has no position in any of the stocks mentioned. The Motley Fool recommends CVS Health and UnitedHealth Group. The Motley Fool has a disclosure policy.

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Stocks Mentioned

CVS Health Corporation Stock Quote
CVS Health Corporation
CVS
$95.37 (-1.66%) $-1.61
UnitedHealth Group Incorporated Stock Quote
UnitedHealth Group Incorporated
UNH
$505.04 (-0.74%) $-3.79

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