09:56 AM EDT, 08/07/2024 (MT Newswires) -- CVS Health ( CVS ) on Wednesday cut its full-year earnings outlook and reported an annual decline in second-quarter profit amid continued headwinds in the company's health care benefits segment.

CVS now anticipates adjusted earnings between $6.40 and $6.65 in 2024, down from its previous forecast of at least $7. The consensus on Capital IQ is for normalized EPS of $6.95.

The revised profit outlook reflects "continued pressure" in the health care benefits business, partially offset by strength in the health services and pharmacy and consumer wellness segments, the company said.

Brian Kane, president of Aetna, CVS' health insurance unit, will leave the company, effective immediately. CVS Chief Executive Karen Lynch will take over leadership of the health care benefits segment. CVS Chief Strategy Officer Katerina Guerraz will be the Chief Operating Officer of the segment.

"We are taking action today to ensure we make the most of our many opportunities, including leadership changes in the health care benefits segment," Lynch said.

For the three months through June 30, adjusted EPS fell to $1.83 from $2.21 a year earlier due lower operating results at the health care benefits segment. That segment's performance reflected "continued utilization pressure and the unfavorable impact of the company's Medicare Advantage star ratings for the 2024 payment year within the Medicare product line," CVS said. The adjusted EPS figure was higher than the Street's $1.73 forecast. Revenue rose 2.6% year over year to $91.23 billion, but fell short of analysts' $91.43 billion estimate.

Sales in the health care benefits segment climbed 21% year over year to $32.48 billion, driven by Medicare and commercial product lines. The division's medical benefits ratio, which is used to measure medical costs as a percentage of premium revenue, moved to 89.6% from 86.2% last year. A lower ratio likely indicates higher profitability.

For 2024, CVS expects the health care benefits segment's medical benefit ratio in a range of 90.6% to 90.8%, an increase of 80 basis points to 100 basis points versus its previous guidance, Chief Financial Officer Thomas Cowhey said during an earnings call on Wednesday, according to a Capital IQ transcript.

Health services revenue fell 8.8% from last year to $42.17 billion, while pharmacy and consumer wellness increased 3.7%.

"Medical cost trends remained elevated in the second quarter at levels consistent with our restated first quarter experience, which benefited from strong prior period development," Cowhey said on the call, discussing Medicare Advantage. "However, early indicators for July suggests we may see incremental pressure, particularly in inpatients. As a result, our updated guidance range now reflects the trends in the second half of 2024 could be higher than levels seen in the first half."

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