7. CVS Health Corporation (NYSE:CVS)
3-year high-to-low share price decrease as of August 30: 47.8%
CVS Health Corporation (NYSE:CVS) is an American healthcare company that operates a retail pharmacy chain. The stock has fallen by over 29% since the start of 2024 as the company could not satisfy investors with its quarterly earnings this year. The company, in its Q2 2024 results, lowered its earnings forecast for the full year, because of the challenges in its Health Care Benefits segment, which includes its insurance division, Aetna. This marks the second time it has reduced its 2024 forecast. The company had previously lowered its guidance following its Q1 results for the same reason.
While investors are displeased with this decision, CVS Health Corporation (NYSE:CVS) had a significant reason for the revised outlook: rising medical costs. As things gradually return to normal, surgeries that were delayed or impossible due to COVID-19 are now being scheduled again, leading to an increase in expenses. This was also highlighted by Ariel Investments in its Q2 2024 investor letter. Here is what the firm has to say:
“American healthcare company, CVS Health Corporation (NYSE:CVS), also declined following disappointing earnings results and a subsequent reduction in full year guidance. The miss was primarily due to increased utilization of Medicare Advantage plans and weakness in the health services segment driven by the loss of a large client and continued pharmacy client price improvements. In response, management reiterated its focus on improving margins and enhancing its positioning in Medicare Advantage. CVS believes the program can remain an attractive business for Aetna and CVS Health over time and will construct its bid for 2025 as a multi-year repricing opportunity across plan level benefits. Meanwhile, CVS continues to return capital to shareholders through dividends and a recent accelerated share repurchase transaction.”
That said, CVS Health Corporation (NYSE:CVS) believes that it is well-positioned for success both now and in the future. It is accelerating innovation by implementing more transparent pharmacy reimbursement models, increasing the adoption of biosimilars, and enhancing patient outcomes through its connected healthcare delivery assets. Its integrated model and strategic approach enable it to perform effectively in a challenging environment, delivering the value its customers expect. In the second quarter of 2024, the company reported revenue of $91.2 billion, which showed a 2.6% growth from the same period last year.
CVS Health Corporation (NYSE:CVS) also cut its guidance for operating cash flow to $9 billion from $10.5 billion in the previous quarter. Despite this reduced guidance, its strong cash position is noteworthy, particularly when considering dividends. In the first six months of the year, the company generated $8 billion in operating cash flow. Its trailing twelve-month levered free cash flow came in at $5.58 billion. The company offers a quarterly dividend of $0.665 per share and has a dividend yield of 4.65%, as of August 30.
As of the close of Q2 2024, 60 hedge funds in Insider Monkey’s database held stakes in CVS Health Corporation (NYSE:CVS), down from 54 in the previous quarter. These stakes have a total value of over $2.77 billion. With nearly 13 million shares, Pzena Investment Management was the company’s leading stakeholder in Q2.
