Shares of CVS Health (CVS) plummeted in trading on Friday after the healthcare company announced the departure of its CEO, Karen Lynch. Lynch will leave the company, in agreement with its Board of Directors, and will be replaced by David Joyner as the President and CEO of CVS, effective October 17. In addition, Roger Farah will now be the Executive Chairman of the Board.
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CVS Announced Preliminary Guidance for the Third Quarter
In addition, the company announced preliminary guidance for the third quarter and now expects adjusted earnings in the range of $1.05 to $1.10 per share. This was short of analysts’ expectations of $1.69 per share.
CVS’s earnings are being dragged lower due to rising costs impacting its health insurance business. In fact, health insurers offering Medicare plans, which are designed for individuals aged 65 and above and those with disabilities, have seen expenses rise steadily over the past year. Consequently, CVS reported a medical care ratio of 95.2%, above analysts’ expectations of 90.9%. The medical care ratio is the percentage of premiums spent on medical care by the health insurer.
With this preliminary guidance, the company has withdrawn its prior guidance for the third quarter issued during its second-quarter earnings call on August 7. CVS is expected to announce its Q3 results on November 6.
Is CVS a Good Stock to Buy Right Now?
Analysts remain cautiously optimistic about CVS stock, with a Moderate Buy consensus rating based on nine Buys and five Holds. Year-to-date, CVS has declined by more than 15%, and the average CVS price target of $69.92 implies an upside potential of 9.8% from current levels.
