04:22 PM EDT, 10/22/2024 (MT Newswires) -- CVS Health's ( CVS ) Q3, full-year 2024 and 2025 earnings per share forecasts have been lowered due to rising costs, elevated medical loss ratio and uncertainties surrounding its Medicare Advantage plans, UBS Securities said in a report emailed Tuesday.

UBS discusses the uncertainty surrounding CVS's financial outlook, and how much of the 280 basis points of extra medical loss ratio, or MLR, pressure from Q3 is due to rising costs versus previous issues, the note said.

The earnings preannouncement showed an MLR of 93.0%, higher than the 90.2% consensus estimate. This uncertainty will remain until CVS reports its financial results on Nov. 6, creating a range of possible outcomes for Q4 EPS and setting the stage for 2025, UBS said.

Key to this outlook is how much of the 2024 cost pressure will carry into 2025, as CVS revises its Medicare Advantage plans, particularly around supplemental benefits. However, UBS assumes that half of the elevated cost pressure from Q4 2024 will extend into H1 2025.

UBS reduced its Q3 EPS estimate for CVS Health ( CVS ) from $1.62 to $1.06, citing lower health care benefits adjusted operating income due to the premium deficiency reserve and an elevated medical loss ratio.

Despite a meaningful tax benefit, the full-year 2024 EPS forecast has been cut from $6.54 to $5.81, driven by a higher cost trend. UBS has also lowered its fiscal 2025 EPS estimate to $6.68 from $7.36, reflecting continued elevated costs in H1 2025.

UBS noted a downside risk of $0.75 if elevated costs persist, with a potential upside of $0.40 if mitigated through Medicare Advantage plan revisions.

UBS has a neutral rating on CVS Health ( CVS ) with a 12-month price target of $60.

Shares of CVS Health ( CVS ) were down 2.1% in recent trading.

Price: 56.97, Change: -1.20, Percent Change: -2.07