In a much needed about-face for CVS, the retail giant on Feb. 12 reported better-than-expected Q4 2024 earnings, following a tumultuous year marked by troubles at its insurance arm, Aetna.
CVS’s net income fell 45% from $8.4 billion at the end of 2023 to $4.6 billion at the end of 2024, a decline that executives had largely blamed on higher medical costs in its Aetna business. As costs rose and revenue declined in 2024, CVS executives announced a series of leadership changes and a $2 billion cost-savings plan that included closing thousands of pharmacies.
By the end of last year, total revenue for Q4 hit $97.71 billion, up from $93.8 billion, and higher than the $97.19 that Wall street analysts expected, CNBC reported. Investors were so relieved that CVS shares rose 15% by closing time, the highest rise the company has seen in more than 25 years, according to Bloomberg.
Part of the revenue bump was thanks to Aetna, which reported $33 billion in Q4 2024 revenue, up more than 23% compared to $26.7 billion in Q4 2023.
Aetna performed better in Q4 because the medical cost ratio—the amount the insurer pays to cover members’ medical claims compared to the amount it receives in premiums—was “less severe” than expected, according to EVP and CFO Thomas Cowhey, meaning the company didn’t spend as much as execs thought it would to cover members’ medical costs.
“We’ve actually delivered material progress in terms of stabilizing Aetna’s operation and also bringing the financial discipline back to the organization,” CVS president and CEO David Joyner, who took the reins from Karen Lynch in Oct. 2024, said during the company’s earnings call. “I’m very confident and very bullish on the continued recovery of that business.”
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Overall, CVS brought in $372.8 billion in revenue in 2024, up more than 4% from $357.8 billion in 2023. Joyner said he expects the company to make between $5.75 and $6 per share in 2025.
Zoom out. The company’s main competitor, Walgreens, also reported better-than-expected earnings in its most recent quarter thanks to a bump in total sales and progress in its turnaround strategy, which also includes shuttering thousands of pharmacies.
Beyond Aetna, CVS also owns Caremark, one of the three biggest pharmacy benefit managers (PBMs) in the US that collectively control about 80% of the prescription drug market.
PBMs have come under intense federal scrutiny in the last few years, with Federal Trade Commission releasing a report last month accusing Caremark, along with Cigna’s Express Scripts and UnitedHealth Group’s Optum Rx, of inflating prices for cancer, HIV, and other medications by “up to thousands of percent.”
During CVS’s earnings call, Joyner defended Caremark, claiming the PBM’s work is “a critical counterbalance to the monopolistic tendencies of drug manufacturers.”
“We will continue to play our unique role in the drug supply chain, bringing the full breadth of our capabilities and market expertise to reduce drug prices for all customers,” Joyner said.