CVS Health Reports 6.3% Revenue Growth, 96.9% Decline in Net Income in Q3 2024

CVS Health Corporation reported its financial results for the three and nine months ended September 30, 2024, revealing significant changes in revenue, profitability, and strategic developments compared to the previous fiscal period.

For the third quarter of 2024, CVS Health generated total revenues of $95,428 million, marking a 6.3% increase from $89,764 million in Q3 2023. The nine-month revenue also rose by 4.2% to $275,099 million from $263,963 million. The growth was primarily driven by a 25.4% increase in premium revenues, which reached $30,925 million, and a 21.1% rise in services revenue to $4,279 million. However, net income for Q3 2024 plummeted to $712 million, a 96.9% decrease from $2,265 million in the same quarter of the previous year, largely due to restructuring charges and premium deficiency reserves totaling approximately $1.1 billion.

Operating income for Q3 2024 was $832 million, down 77.5% from $3,690 million in Q3 2023. The decline was attributed to increased health care costs, which surged by 39.2% to $29,922 million, and higher operating expenses, which rose by 6.9% to $10,557 million. The effective income tax rate also increased to 32.4% from 25.0% in the prior year, reflecting lower pre-tax income.

In terms of strategic developments, CVS Health completed the acquisition of Oak Street Health in May 2023, enhancing its value-based care strategy. The company also recorded restructuring charges of approximately $1.2 billion in Q3 2024, which included $607 million for store impairments and $293 million for corporate workforce optimization. CVS plans to close 271 retail stores in 2025 as part of its strategic review.

The Health Services segment experienced a revenue decline of 5.9% in Q3 2024, totaling $44,129 million, while the Pharmacy & Consumer Wellness segment saw a 12.3% increase in revenues to $32,423 million. The latter segment benefited from a 19.5% rise in pharmacy same-store sales, driven by increased prescription volume.

Cash flow from operating activities for the nine months ended September 30, 2024, was $7,247 million, a significant decrease of 54.9% compared to the prior year, primarily due to the early receipt of a $5.2 billion CMS payment in 2023. The company also repurchased 39.7 million shares for approximately $3.0 billion during the nine-month period.

Overall, CVS Health's financial performance reflects a complex landscape of growth in certain areas, significant restructuring efforts, and challenges in profitability, particularly within its Health Care Benefits segment.