Investing.com - CVS Health (NYSE:CVS) has posted better-than-anticipated income and revenue in the fourth quarter, as the healthcare group pursues a broad overhaul of its operations under new Chief Executive David Joyner.
Shares in the company soared by more than 13% in early U.S. trading. Prior to the start of dealmaking on Wednesday, the stock has fallen by more than 28% over the past one-year period, weighed down by a string of profit target misses and a decision by CVS to withdraw its annual forecast.
Like its peers, CVS has been hit by an uptick in medical costs as more patients choose to go ahead with elective surgeries that were put off during the COVID-19 pandemic. CVS was especially impacted by the trend because it enrolled the highest amount of new members to its Medicare plans for people aged 65 and older.
The developments have subsequently risen doubts among analysts over the state of the business, which includes a pharmacy benefit manager, a sizeable insurance division and a major U.S. retail pharmacy chain. Joyner’s push to turn around CVS, partly through a cost-cutting drive, have become a central focus for investors.
In a statement, Joyner said CVS has been boosted by growth at its pharmacy and consumer wellness segment, which have helped to offset "industry-wide challenges" that have impacted its health care benefits division.
Revenue from its health services unit was $47.02 billion, while sales at the pharmacy network were $25.20 billion, both ahead of analysts’ projections.
Group-wide revenue, meanwhile, climbed by 4.2% versus the year-ago period to $97.71 billion, higher than expectations of $97.21 billion.
CVS’s medical benefit ratio -- a closely-monitored metric tracking the premiums spent on medical care for insurance holders -- was 94.8%, down from a record high of 95.2% in the prior quarter. The measure was 88.5% in the corresponding quarter in 2023.
Adjusted earnings per share in the three months ended on December 31 came in at $1.19, down from $2.12 in the year-ago period but above Bloomberg consensus estimates of $0.92.
"Sentiment had certainly turned more positive/optimistic heading into results and the headlines should not deter that pathway," analysts at Leerink Partners said in a note to clients.