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In a plot twist that could rival a daytime soap opera, CVS Health has bid farewell to Karen Lynch and ushered in David Joyner as the new CEO, effective just one day before the announcement – because why not keep everyone on the edge of their seats? It’s a classic move in corporate theatre where the only consistent element is a 20% plunge in stock prices this year. Talk about a dramatic entrance! Or should we call it a financial nosedive?
The CVS rollercoaster isn’t just speeding downhill for kicks; it appears higher medical costs are gnashing their teeth at the insurance unit, Aetna, while shoppers have collectively decided to spend like it’s the Great Depression—at least when it comes to filling prescriptions. Oh, and did we mention CVS just slashed its full-year profit guidance for the third time? That’s right, folks; we’re expecting a financial buffet, but the main course is distinctly absent.
As if the comedy of errors wasn’t enough, CVS has boldly projected adjusted earnings of $1.05 to $1.10 per share for the upcoming quarter, a number that would almost be impressive if it didn’t come wrapped in the kicker of “higher than expected medical costs.” It’s wonderful how optimism and realism can cohabit in the corporate world, isn’t it?
“Continuing elevated medical cost pressures” was the phrase of the day, leading CVS to suggest investors might consider not eating the guidance they digested just two months ago. Pro tip: next time, chew more thoroughly before swallowing corporate promises!
As CVS gears up for their Q3 earnings on Nov. 6, there’s an audience member in this drama who isn’t shy about speaking up—major shareholder Glenview Capital, who seems to think the board of directors needs a makeover worthy of an extreme home renovation show. Can we expect a few new faces or perhaps just a fresh coat of paint over the same issues?
Joyner, who appears to be auditioning for ‘The Comeback Kid,’ previously oversaw Caremark (CVS’ pharmacy benefits manager) before a brief retirement that makes you wonder who actually enjoys retirement anyway. “I came back for the excitement,” he said—clearly being sarcastic or just a glutton for punishment.”
Chairman Roger Farah is hoping Joyner’s “deep understanding” of the business will somehow navigate CVS through the treacherous waters of scrutiny from the Biden administration as they eye PBMs like hawks on a rabbit. Spoiler alert for the CVS team: the scrutiny is not expected to let up anytime soon, no matter what happens in the election. Hope you brought a flotation device!
Looking forward, CVS aims for a 100 to 200 basis point margin improvement in Medicare Advantage. Because what better way to celebrate an internal crisis than to aim for a future in which expenses keep rising and profits continue to evaporate like an ice cream cone on a hot August day? The medical benefit ratio is set to pop up from 85.7% to an alarming 95.2% this quarter—like a jump scare in a horror movie, you never know when it’ll hit you!
So, tune in next month when CVS reports their third-quarter earnings—and maybe prepare your favorite comfort snack in case the numbers lead you to a financial meltdown worthy of a daytime drama plot twist!
—Observations by your friendly neighborhood financial satirist.
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