10:14 AM EDT, 05/01/2024 (MT Newswires) -- CVS Health ( CVS ) cut its full-year forecast after a weaker-than-expected first quarter, dragged down by utilization pressure in the healthcare company's Medicare Advantage business.

The company now anticipates adjusted earnings of at least $7 per share for the 2024 financial year, down from its prior projection of at least $8.30. The consensus on Capital IQ is for normalized EPS of $8.26. The stock dropped 18% in Wednesday's trading session.

The lowered profit outlook is due to the impact of elevated Medicare utilization in the company's health care benefits business, CVS Health ( CVS ) said in an investor presentation. Medicare Advantage is a health plan provided by a private company for the US federal Medicare program.

"When we last gave 2024 guidance, our outlook assumed normalized Medicare Advantage trends on top of the elevated baseline we experienced in the fourth quarter of 2023," Chief Executive Karen Lynch said during an earnings call, according to a Capital IQ transcript. "It's now clear that the first quarter 2024 Medicare Advantage trends are notably above this level."

Revenue is now pegged at a minimum of $369 billion for the current year, down from the guidance issued in February of at least $371.3 billion, the presentation showed. The Street is looking for revenue of $369.62 billion.

For the three months through March, adjusted EPS fell to $1.31 from $2.20, trailing the Street's view for $1.70. Revenue rose 3.7% to $88.44 billion, but fell short of analysts' $89.2 billion estimate.

Sales in the health care benefits segment climbed 25% to $32.24 billion with growth across the Medicare and commercial product lines. The division's medical benefits ratio, which is used to measure medical costs as a percentage of premium revenue, worsened to 90.4% from 84.6% on an annual basis due to increased utilization in Medicare Advantage, among other factors. A lower ratio likely indicates higher profitability.

Health services revenue gained 9.7% to $40.29 billion, while pharmacy and consumer wellness increased 2.9% to $28.73 billion. Total operating costs widened to $86.17 billion from $81.83 billion in the 2023 quarter.

"The current environment does not diminish our opportunities, enthusiasm, or the long-term earnings power of our company," Lynch said in a statement. "We are confident we have a pathway to address our near-term Medicare Advantage challenges."

Price: 55.50, Change: -12.22, Percent Change: -18.04