CVS needs “realistic targets” it can exceed, an analyst says after firing its CEO

Headquartered in Woonsocket, Rhode Island, CVS owns the largest pharmacy chain in the country with more than 9,000 stores. Until the end of 2022 Lynch helped lift it CVS’s stock price rose from $70 to about $110, and investors agreed with their new strategy: turning CVS into a company One stop shop for basic care, AssetsShawn Tully reports. And for preventative care, CVS planned to store tons of data about patients’ conditions on site Etna Insurance unit.

Lynch’s vision was to address the expensive, largely consumer-unfriendly health care system. “But Lynch failed to fully implement the paradigm that is already in the process of upending the current regime,” Tully writes a new article.

CVS’s stock price has fallen more than 20% this year due to challenges with Medicare Etna As medical costs rose and there was also potential activist investor action.

“Given the execution deficiencies at CVS, particularly at health insurer Aetna, which Lynch previously led, we are not surprised by the management change,” Julie Utterback, senior equity analyst at Morningstar, said in a note on Friday.

As the new CEO at CVS, Joyner’s strategic partner will be CFO Tom Cowhey promoted He took over the position in January after serving as interim CFO. Cowhey, formerly SVP of corporate finance, joined CVS in February 2022.

CVS is seeking a multi-year opportunity to achieve $2 billion in savings. To achieve this, less than 1% of the workforce or around 2,900 employees will have to be cut and invested in technologies. Cowhey said on CVS’s second-quarter earnings call that the company expects to save at least $500 million in adjusted operating income in 2025 from this initiative.

I asked Utterback about the key issues Cowhey and Joyner need to address to improve the company. Because most of the recent forecasting deficiencies are related to Aetna’s health insurance business, that business in particular requires better controls over underwriting risk and medical cost forecasting in key end markets such as Medicare Advantage, she said.

“Furthermore, in hindsight, CVS was overly aggressive with guidance this year, and cutting targets quarterly definitely does not inspire confidence among investors,” Utterback said. “Going forward, investors would be pleased to see signs that the CVS leadership team has a handle on the risks and opportunities facing the entire company and sees realistic goals that the company can meet or exceed,” she said.

CVS also reported in the notice on Friday, weaker-than-expected third-quarter results. The company provided preliminary adjusted EPS estimates of $1.05 to $1.10, or below the FactSet consensus of $1.69. And the health insurance loss ratio rose significantly, and previously provided guidance, including earnings per share of $6.40 to $6.60 in 2024 and double-digit earnings growth for 2025, should no longer be relied upon, according to Morningstar.

Sheryl Estrada
sheryl.estrada@fortune.com

The following sections of CFO Daily were curated by Greg McKenna

Leaderboard

Maria Meixelsperger will retire as CFO of the vehicle service chain Valvoline (NYSE: VVV) and will remain in that role until a successor is named, the company said. Meixelsperger joined the company in 2016, shortly before its initial public offering and spinoff from Ashland Global Holdings. She was previously CFO of shoe giant DSW, now known as Designer Brands. She serves on the boards of shoe retailer Genesco and the Cincinnati branch of the Federal Reserve Bank of Cleveland.

Jan De Raeymaeker has been appointed CFO of the British budget airline easyJet (LSE: EZJ), effective January 20. He will succeed current CFO Kenton Jarvis, who will be promoted to CEO. De Raeymaeker is currently CFO of Lineas, Europe’s largest private rail freight company. He previously held the same role at Brussels Airlines and also held management positions at Arthur D. Little and De Valck Consultants.

Big deal

Energy CFOs are generally confident about the state of the sector in 2025, according to a recent study report by Grant Thornton. The company surveyed 161 finance chiefs, 56% of whom said global and domestic economic conditions bode well for the energy industry over the next six months.

“One reason for optimism is the fact that oil and gas prices remain above historical levels,” he said Bryan Benoit, The company’s principal and global head of energy and natural resources said: “While demand for hydrocarbons continues to rise as renewable energy production is not accelerating fast enough to meet increasing energy demand.”

Still, many finance leaders are committed to improving operational efficiency, with 40% citing this as their biggest business challenge in the second half of this year. They could do this through mergers and acquisitions, with 51% of respondents saying there is a moderate likelihood that their company will be involved in at least one transaction in the next 12 months.

Go deeper

According to Mercer’s annual study, the Netherlands continues to have the best income system for retirees Global Bond Index. The company evaluated programs based on three categories – appropriateness, sustainability and integrity – with Iceland, Denmark and Israel being the only other countries to receive an overall “A” grade. The USA received a C+.

Overheard

“Long-term relationships are based on trust, and the same goes for our money habits. I have seen couples go years without realizing that their financial behavior was negatively impacting their spouse or partner. The sooner you can uncover these potential surprises, the better.”

—Tom Thiegs, Senior Leadership and Legacy Consultant at US Bank Ascent Private Capital Management, told Fortune’s Alicia Adamczyk on how the rising average marriage age in the U.S. has changed the dynamics of household finances.

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