CVS Health has lowered its 2023 earnings forecast after making multimillion-dollar acquisitions of primary care provider Oak Street Health and home health provider Signify Health over the past few months. According to a report in San Diego Union-Tribune, the firm’s adjusted earnings for 2023 will range $8.50 to $8.70 a share, which is 20 cents lower on both ends of the range from a forecast in November 2022 that was reaffirmed in February 2023. The revised projections did not meet Wall Street expectations, which had been $8.76. Despite this, CVS Health is expanding its home healthcare and telemedicine services as part of a move to reduce costs and enhance patient outcomes. CVS recently completed deals for both a primary care provider and a home healthcare provider, which it said reflected its spending priorities as a drugstore chain and insurer.
CVS Health reported revenue of $85.28bn for Q1 2022, an increase of 11% YoY, with earnings of $2.20 per share, beating expectations. However, the company’s adjusted earnings guidance for 2023 was lowered to a range of $8.50 to $8.70 per share, down from the prior expectation of $8.70 to $8.90 per share. CVS Health’s health services division, which includes its pharmacy benefit manager CVS Caremark and health-care services, posted revenue of $44.59bn and saw an increase in pharmacy claims processed, while the company’s retail arm recorded revenue of $27.92bn and saw an increase in prescriptions filled, despite a decline in Covid-19 vaccinations. Meanwhile, CVS’s health insurance division generated revenue of $25.88bn, and total membership in its medical plans rose by 1.1 million to 25.5 million.
CVS Health plans to slow its recent acquisition spree and focus on integrating its purchases of healthcare service provider Signify Health and primary care provider Oak Street Health. The company said it would look to make deals in home or health services in the longer term. This shift in strategy comes after rival Walgreens Boots Alliance announced that it would not seek acquisitions in the short term after recent deals in the sector. CVS was forced to cut its full-year profit forecast to account for transaction and integration costs for the two deals. However, CVS Health did beat Wall Street projections for Q1 2021, with an adjusted profit of $2.20 per share for the first quarter, beating analysts’ forecasts by 11 cents.
In summary, CVS Health’s reduced earnings forecast for 2023 comes as a result of significant investments in providing care. As the company expands its healthcare services, including primary care and home health offerings, it has been forced to trim its earnings projections. CVS Health will now slow its acquisition strategy to focus on integrating previous purchases before potentially entering new markets in home or health services. While the company’s latest earnings report exceeded market expectations, the lowered guidance could impact investor confidence in the firm’s future growth prospects.
