By Leslie Small
During a Feb. 12 presentation outlining its 2019 financial results, CVS Health Corp. touted a “successful first full year with Aetna,” saying the transaction produced “synergies above expectations” at approximately $500 million. And CVS’s Health Benefits segment posted a “solid” fourth quarter, in the words of Citi Research securities analyst Ralph Giacobbe.
Across its enterprise in 2019, CVS delivered adjusted earnings per share (EPS) of $7.08 with total revenues of nearly $257 billion — a 32% year-over-year increase, CEO Larry Merlo told investors during the company’s earnings call, per a transcript of the call published by the Motley Fool.
For the fourth quarter of 2019, CVS reported an EPS of $1.73, topping the consensus estimate of $1.68. Giacobbe noted that revenue “was particularly better” in CVS’s PBM segment.
For Molina Healthcare Inc., the firm “was perhaps a victim of its own success” in the fourth quarter of 2019, Jefferies analysts David Windley and David Styblo advised investors on Feb. 12. The company’s management “has executed the turnaround story so well that we and others expected the ’20 HIX [health insurance exchange] pivot to land gently as well,” they wrote. Instead, that business segment missed its earnings target by roughly $75 million, the Jefferies analysts advised.
Molina’s Affordable Care Act exchange “pivot” involved the insurer lowering its prices in a bid to increase enrollment, Windley and Styblo explained. However, Molina’s lower prices “weren’t, by themselves, enticing enough,” they wrote. “With lower pricing, standard broker expenses, and an infrastructure built for larger membership, ’20 margins get squeezed by 550 [basis points], or 53%, leading to the 50% profit decline.”
However, Molina’s two pending acquisitions — a $40 million deal to buy New York Medicaid insurer YourCare HealthPlan and a $50 million deal to add Illinois-based NextLevel Health Partners — “present upside,” the analysts advised.