CVS Health Earnings Top Forecasts As Healthcare Benefits Revenues Surge

“Last year was defined by outperformance across our foundational businesses,” said CEO Karen Lynch.

CVS Health Corp.  (CVS) – Get Free Report posted stronger-than-expected fourth quarter earnings Wednesday, powered by outsized sales gains its in healthcare benefits division and solid retail pharmacy revenues. 

CVS said adjusted earnings for the three months ending in December were pegged at $1.99 per share, up a penny from the same period last year and 7 cents ahead of the Street consensus forecast. Group revenues, CVS said, rose 9.5% from last year to $83.8 billion, well ahead of analysts’ estimates of a $76.2 billion tally.

Same sore sales were up 7.7% from last year, CVS said, while pharmacy store sales rose 9.1%. 

Retail sales were up 4% “increased prescription and front store volume, including the impact of an elevated cough, cold and flu season compared to the prior year.” The group’s healthcare benefits division saw sales rise 11.3% to $23.03 billion.

Looking into the current financial the year, CVS said it sees profits in the region of $8.70 to $8.90 per share, with cashflows from its overall business expected to come in between $12.5 billion to $13.5 billion.

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“Last year was defined by outperformance across our foundational businesses, robust cash flow from operations and meaningful progress against our value-based care delivery strategy,” said CEO Karen Lynch. “2022 was a year of progress, and we continue to build on that momentum with bold moves that will improve the health care experience.” 

CVS shares were marked 1.9% higher in pre-market trading immediately following the earnings release to indicate an opening bell price of $87.63 each.

Earlier Wednesday, CVS Health confirmed it would buy Oak Street Health OSH for $10.6 billion, including debt, ending weeks of speculation over the fate of the Chicago-based primary care center operator.

CVS said it will pay $39 for Oak Street Health in an all-cash transaction that it expects to close later this year. The deal has been approved by the boards of both companies, CVS said, and Oak Street will continue to be lead by current CEO Mike Pykosz once the transaction is completed.

CVS may also face potential claw backs from the U.S. Department of Health and Human Services as it looks to recoup around $4.7 billion in funds that may have paid to companies in the Medicare Advantage system.

The HHS said payments made to various Medicare Advantage Organizations that were based on a submitted diagnosis that wasn’t backed-up by the beneficiary’s medical records would be audited, and the so-called risk adjustment overpayments — which haven’t been collected since 2007 — would be recovered over the next ten years under the so-called RADV final rule.

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