CVS Health Corporation
CEO : Ms. Karen Sue Lynch
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2022 Q4 | 9.5% YoY | 62.3% | 77.8% | 2023-02-08 |
Shawn Guertin says,
Q4 2022 Results
- Total Q4 revenues: $83.8 billion, up 9.5% YoY
- Full year 2022 revenues: $322.5 billion, up 10.4%
- Adjusted EPS for 2022: $8.69, up 9.7%
- Generated $16.2 billion in cash flow from operations in 2022
Performance by Business Segment
- Health Care Benefits segment: revenue up 11.3% YoY, operating income up 68.2% YoY
- Pharmacy Services segment: revenue up 11.2% YoY, operating income up 9% YoY
- Retail/Long-Term Care segment: revenue up 4% YoY, operating income down 25.1% YoY
Outlook for 2023
- Expected revenue growth of 3% to 5%
- Reaffirming full year adjusted EPS guidance range of $8.70 to $8.90
- Projected membership growth of 2% to 4% in Health Care Benefits segment
- Expected Pharmacy Services revenue growth of 1% to 2%
- Projected Retail/LTC revenue growth of 1% to 3%
Oak Street Transaction
- CVS Health to acquire Oak Street, a primary care asset focused on improving outcomes for Medicare patients
- Oak Street has high visibility into embedded adjusted EBITDA of over $1 billion
- Expected to have over 300 clinics by 2026, with projected embedded Oak Street adjusted EBITDA of over $2 billion
- Expected synergies to realize more than $500 million of value over time
Mike Pykosz says,
Oak Street Health’s Mission and Partnership with CVS Health
- Oak Street Health aims to address the root causes of high-cost, low-quality care and poor experiences for Medicare patients.
- The company operates a network of primary care centers that specialize in care for older adults in areas with large concentrations of Medicare-eligible patients with incomes below 300% of the federal poverty line.
- Oak Street Health’s innovative care model benefits patients, providers, and payers by improving health outcomes, lowering medical costs, and delivering a better patient experience.
- By joining CVS Health’s ecosystem, Oak Street Health will accelerate its journey to improve patient outcomes and experiences while continuing to invest in its innovative care model.
Proven Track Record of Delivering Consistent Performance
- Oak Street Health’s focus on providing coordinated holistic care has led to reducing hospital admissions by over 50% and lowering 30-day readmissions by 42%.
- The company’s care model can work outside of Med and has demonstrated its capabilities and results in the Medicare direct contracting program.
- Among all the participants in the program, Oak Street Health generated savings that were 2x higher than any other multistage direct contract candidate and was ranked number one.
Benefits of the Partnership with CVS Health
- CVS Health’s expansive consumer touchpoints, including the trusted CVS pharmacists, will broaden and deepen Oak Street Health’s connections with the patients under its care.
- CVS Health’s breadth of offerings and proven ability to scale assets will significantly enhance Oak Street Health’s ability to tackle the huge challenges in healthcare.
Outcome for Stakeholders
- The transaction between Oak Street Health and CVS Health is seen as a great outcome for all of Oak Street Health’s stakeholders, including patients, all of its payer partners, its team of Oakees, and shareholders.
Q & A sessions,
Clinic Expansion and Synergy Realization
- Numbers are based on maintaining a trajectory of 35 to 40 clinics a year expansion
- Exploring alternative avenues of accelerating synergy realization to manage greater clinic growth
- Accelerated growth has real long-term return benefits
Medicare Advantage Value-Based Care
- High-quality Medicare Advantage value-based care assets are desired
- Signify and Oak are assets that support navigating the future of Medicare Advantage and value-based care
- Oak is a demonstrable asset that has proven to improve outcomes and reduce costs
Financials and Synergies
- Potential to move the needle from an earnings perspective in a company of this size and scale
- Projected to improve overall long-term earnings company growth rate by at least 100 basis points a year
- Improvements in growth rate are sustainable
- Deal has a lot of long-term growth earnings power
- Sustainable improvements in growth rate are not dilutive
- Building substantial embedded long-term value in that footprint
- Synergies are tied up in accelerated growth and improved retention of MA members
- Roughly EPS-neutral in year four of ownership and accretive on an EPS line for year five
Potential Membership Growth and Capital Deployment
- Potential to drive membership growth along the J-curve of cohort financials
- Potential to strengthen the value of the offering with other fulfillment assets
- Ample amount of financial flexibility over the next 2 years to 3 years after this transaction
- Between $4 billion and $8 billion of flexibility over the ’23, ’24 window
- $10 billion to $15 billion of flexibility in the ’24, ’25 window
Shareholder Approvals and Oak Street’s Mission
- No separate approvals required
- Oak Street’s mission is to rebuild healthcare as it should be
- CVS Health brings a huge amount of resources that Oak Street can partner with and leverage
No bad stock 