CVS' High Utilization & MBR to Cut 2024 Profits: Is the Stock a Sell?

Zacks2024-12-09

CVS Health CVS stock closed at $55.29 on Friday, near its 52-week low of $52.71. The stock has plunged 30% year to date, reflecting the underlying challenges of the retail pharmacy industry. The ...

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The ...</p>\n\n<a href=\"https://finance.yahoo.com/news/cvs-high-utilization-mbr-cut-144800637.html\">Source Link</a>\n\n</div>\n","source":"yahoofinance","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>CVS' High Utilization & MBR to Cut 2024 Profits: Is the Stock a Sell?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nCVS' High Utilization & MBR to Cut 2024 Profits: Is the Stock a Sell?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-12-09 22:48 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://finance.yahoo.com/news/cvs-high-utilization-mbr-cut-144800637.html><strong>Zacks</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>CVS Health CVS stock closed at $55.29 on Friday, near its 52-week low of $52.71. The stock has plunged 30% year to date, reflecting the underlying challenges of the retail pharmacy industry. The ...</p>\n\n<a href=\"https://finance.yahoo.com/news/cvs-high-utilization-mbr-cut-144800637.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU0208291251.USD","symbol_name":"FRANKLIN MUTUAL U.S. VALUE \"A\" (USD) INC","start_time":0,"source_url":"https://finance.yahoo.com/news/cvs-high-utilization-mbr-cut-144800637.html","article_id":"2490870804","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/aJgt5KS9lazlc..S_xDJJA--~B/aD00MDA7dz02MzU7YXBwaWQ9eXRhY2h5b24-/https://media.zenfs.com/en/zacks.com/6e1287c0c07b8954404037d468ef01ec"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2490870804","pubTimestamp":1733755680,"columns":[],"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":"CVS Health CVS stock closed at $55.29 on Friday, near its 52-week low of $52.71. The stock has plunged 30% year to date, reflecting the underlying challenges of the retail pharmacy industry. The company also posted disappointing third-quarter 2024 results last month.However, this PBM and pharmacy retail powerhouse has outperformed the broader Retail Pharmacy and Drug Store industry, which plunged 37.3% during this period. Major competitors of CVS Health — Herbalife Ltd HLF and Walgreens Boots WBA — registered a sharper decline of 47.8% and 67.2%, respectively, during this period.Meanwhile, earnings estimates for CVS Health have slipped 13.1% to $5.32 per share for 2024 over the past 30 days, with nine downward revisions in contrast to no upward movement. For 2025, estimates have declined 10.6% to $6.22 in a month following eight downward revisions and no upward movement.CVS Health’s Medicaid business is experiencing medical cost pressure from higher-than-expected acuity following the r","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU0208291251.USD":"FRANKLIN MUTUAL U.S. VALUE \"A\" (USD) INC","BK4581":"高盛持仓","LU0321505439.SGD":"Schroder ISF Global Dividend Maximiser A Acc SGD","LU0072461881.USD":"BGF US BASIC VALUE \"A2\" ACC","BK4504":"桥水持仓","BK4183":"个人用品","IE00BSNM7G36.USD":"NEUBERGER BERMAN SYSTEMATIC GLOBAL SUSTAINABLE VALUE \"A\" (USD) ACC","LU0320765489.SGD":"FTIF - Franklin Mutual US Value A Acc SGD","IE00BZ1G4Q59.USD":"LEGG MASON CLEARBRIDGE US EQUITY SUSTAINABILITY LEADER \"A\"(USD) INC (A)","LU1699723380.USD":"ALLSPRING GLOBAL LONG/SHORT EQUITY \"AP\" (USD) ACC","BK4532":"文艺复兴科技持仓","LU1059921491.USD":"NORDEA 1 GLOBAL STABLE EQUITY \"HB\" (USDHDG) ACC","IE00BKVL7J92.USD":"Legg Mason ClearBridge - US Equity Sustainability Leaders A Acc USD","LU0070302665.USD":"FRANKLIN MUTUAL U.S. VALUE \"A\" (USD) ACC","LU0006061336.USD":"Blackrock US Small and MidCap Opportunities A2 USD","HLF":"康宝莱","BK4585":"ETF&股票定投概念","BK4128":"药品零售","LU0061475181.USD":"THREADNEEDLE (LUX) AMERICAN \"AU\" (USD) ACC","CVS":"西维斯健康","LU0162691827.USD":"BGF US BASIC VALUE \"A4\" INC","BK4196":"保健护理服务","LU0211331839.USD":"FRANKLIN MUTUAL GLB DISCOVERY \"A\" (USD) ACC","LU1571399168.USD":"ALLSPRING GLOBAL LONG/SHORT EQUITY \"IP\" (USD) ACC","WBA":"沃尔格林联合博姿","BK4588":"碎股","BK4550":"红杉资本持仓","LU0321505868.SGD":"Schroder ISF Global Dividend Maximiser A Dis SGD"},"translate_title":"CVS的高利用率和MBR将削减2024年利润：该股值得卖出吗？","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"WBA":1,"CVS":1,"HLF":1},"content_text":"CVS Health CVS stock closed at $55.29 on Friday, near its 52-week low of $52.71. The stock has plunged 30% year to date, reflecting the underlying challenges of the retail pharmacy industry. The company also posted disappointing third-quarter 2024 results last month.\nHowever, this PBM and pharmacy retail powerhouse has outperformed the broader Retail Pharmacy and Drug Store industry, which plunged 37.3% during this period. Major competitors of CVS Health — Herbalife Ltd HLF and Walgreens Boots WBA — registered a sharper decline of 47.8% and 67.2%, respectively, during this period.\nYTD Share Performance\nImage Source: Zacks Investment Research\nMeanwhile, earnings estimates for CVS Health have slipped 13.1% to $5.32 per share for 2024 over the past 30 days, with nine downward revisions in contrast to no upward movement. For 2025, estimates have declined 10.6% to $6.22 in a month following eight downward revisions and no upward movement.\nImage Source: Zacks Investment Research\nIndustry-wide Pharmacy Reimbursement Crisis\nThe entire retail pharmacy industry is currently grappling with continued pressure from non-reimbursable pharmacy expenses, which are significantly pulling down mass demand for prescription as well as over-the-counter drugs and vaccinations. Going by a National Association of Chain Drugs report, payors are substantially shrinking reimbursement, many times below the cost of buying and dispensing prescription drugs. This is putting substantial and unsustainable financial pressure on companies to the extent that many of the industry players over the past year were seen shutting down their businesses, reducing the number of stores or going private.\nCVS Health, like its industry peers, is severely affected by this ongoing crisis. In fact, despite the company reporting revenue expansion, the shrinking margins and earnings are pretty alarming.\nHigh Utilization Grossly Hurts CVS' Profitability\nThe persistently elevated utilization of medical services is putting significant pressure on CVS Health’s Health Care Benefits segment. The trend was observed since early last year when the division experienced a higher than previously expected medical cost trend in Medicare Advantage due to increased outpatient and supplemental benefit utilization compared with pandemic-influenced utilization levels in the prior year. On top of that, CVS Health recorded a premium deficiency reserve of $766 million in the third quarter due to a premium deficiency in its Medicare product line related to the 2024 coverage year. This continued elevated utilization may lead to record additional premium deficiency reserves in the segment in the fourth quarter of 2024.\nEscalating Medical Benefit Ratio a Cause of Concern\nCVS Health’s Medicaid business is experiencing medical cost pressure from higher-than-expected acuity following the resumption of member redeterminations. During the third quarter, medical benefit ratio (MBR) of 95.2% increased 950 basis points year over year.  A higher MBR typically indicates that the company paid out more in benefits than collected more in premiums, resulting in lower profitability. CVS Health also witnessed unfavorable development of 2024 medical costs related to second-quarter dates of service, which adversely impacted its trend outlook for the rest of 2024. Medical costs in the individual exchange business also accelerated in the third quarter, with broad levels of higher utilization and surging medical costs in certain high-cost geographies.CVS Health increased its risk adjustment accrual for its individual exchange business by approximately $275 million in the third quarter due to updated data. The company will continue to evaluate its revenue accruals for potential additional pressure as it receives updated data on the risk scores later this year and into early 2025.\nCVS Shares Are Expensive\nIn terms of valuation too, CVS Health’s forward 12-month price-to-earnings (P/E) is 8.96X, a premium to the market's average of 8.39X. The company is also trading at a significant premium to other industry players like Walgreens Boots (5.68X) and Herbalife (4.68X). This suggests that investors may be paying a higher price relative to the company's expected earnings growth. It also has a Value Score of A.\nImage Source: Zacks Investment Research\nOur Take\nThe stock’s stretched valuation suggests that investors may be paying a higher price relative to the company's expected earnings growth. Accordingly, despite the continued dip in share prices, this might not be the ideal time to invest in CVS Health. In fact, those who already own this Zacks Rank #5 (Strong Sell) stock may consider selling it, taking into account the company’s gloomy 2024 outlook.\nYou can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.\nWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report\nCVS Health Corporation (CVS) : Free Stock Analysis Report\nHerbalife Ltd (HLF) : Free Stock Analysis Report\nWalgreens Boots Alliance, Inc. (WBA) : Free Stock Analysis Report\nTo read this article on Zacks.com click here.\nZacks Investment Research","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.4","shortVersion":"4.29.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2490870804"}