CVS Health tops Q3 forecasts but absorbs hefty charge for struggling clinic business

Audio By Carbonatix

CVS Health rode double-digit sales growth from drugstores and its pharmacy benefits management business to a better-than-expected third quarter.

The health care giant also hiked its 2025 forecast well above Wall Street estimates. But it booked a nearly $6-billion charge in the quarter for scaling back a care delivery business it expanded two years ago.

The company said Wednesday that it filled more prescriptions at drugstores, partially due to added business from customers of the defunct Rite Aid chain. Sales also rose 9% in the company's health insurance arm, which CVS said was helped by improvements to government business that involves Medicare and Medicaid coverage.

But the company recorded a $5.7-billion goodwill impairment charge for its care delivery business, which includes Oak Street Health primary care clinics it bought for about $10.6 billion in 2023.

CVS Health recently said it will close 16 underperforming clinics early next year. It also is reducing the number of clinics it plans to open.

Oak Street Health specializes in Medicare Advantage patients. CVS Health and competitor Walgreens both pushed aggressively into adding clinics to their stores a few years ago with the goal of becoming a bigger source of care, which can drive business to pharmacies.

But the companies have since scaled back those ambitions under new leadership. CVS Health executives said Wednesday they still believe in the approach, which involves value-based care that aims to keep patients healthy instead of just treating them when they are sick.

But the company also acknowledged that the business is dealing with challenges like high levels of use.

Industry analysts say that clinics can be tough to run initially because they often add patients who haven’t been seeing a doctor regularly. Companies then need to spend money on those customers to improve their health and get chronic diseases under control.

CVS lost nearly $4 billion in the third quarter, including the charge tied to clinics. But total revenue grew almost 8% to $102.9 billion. Adjusted earnings came in at $1.60 per share.

Analysts expected earnings of $1.37 per share on $98.81 billion in revenue, according to the data firm FactSet.

CVS Health Corp., based in Woonsocket, Rhode Island, runs one of the nation’s largest drugstore chains and a huge pharmacy benefit management business that operates prescription drug coverage for employers, insurers and other big clients. It also covers nearly 27 million people through its Aetna insurance arm.

The company now expects adjusted earnings to range from $6.55 to $6.65 this year. That’s a hike of 25 cents per share on both ends from a forecast it made in July.

Analysts predict annual adjusted earnings of $6.38 per share.

Company shares rose 1% Wednesday.