11:24 AM EDT, 10/18/2024 (MT Newswires) -- CVS Health ( CVS ) said Friday that it named David Joyner as its new chief executive while the healthcare giant issued a preliminary third-quarter earnings outlook that came in below Wall Street's estimates.

Joyner, whose appointment was effective Thursday, most recently served as executive vice president of CVS Health ( CVS ), and president of CVS Caremark.

CVS shares slid 8.6% in Friday trading.

"The board believes this is the right time to make a change, and we are confident that David is the right person to lead our company," Chairman Roger Farah, who will now be executive chairman of the board, said in a statement. "We believe David and his deep understanding of our integrated business can help us more directly address the challenges our industry faces, more rapidly advance the operational improvements our company requires, and fully realize the value we can uniquely create."

Joyner replaces Karen Lynch, who stepped down "in agreement with the company's board," according to CVS Health ( CVS ).

"We think the combination of his broad experience in healthcare services, what we view as a wealth of experience in pharmacy services and recent leadership positions with the company should help facilitate a smooth transition," Truist Securities said in a note. The brokerage reiterated its buy rating and a $76 price target on CVS shares.

Earlier this month, Glenview Capital said it was engaged in "constructive conversations" with CVS leadership to enhance the efficiency and governance of the company.

"While the company has tremendous assets across medical and pharmacy benefit management, specialty pharmacy, provider services and drug retail, the company is operating well below its potential and has fallen short in its investment and actuarial approach in recent years," Glenview said at the time.

CVS expects adjusted earnings per share in the range of $1.05 to $1.10 for the third quarter. The consensus on Capital IQ is for normalized EPS of $1.57. The results will likely report a negative impact of $0.63 tied to premium deficiency reserves, or PDRs, primarily related to the company's Medicare and individual exchange businesses within its health care benefits segment. The company expects these PDRs to be "substantially released" during the fourth quarter, benefiting results in the period.

On a GAAP basis, CVS expects its EPS between $0.03 to $0.08 amid a restructuring charge of $1.2 billion related to incremental store closures in 2025 and cost-reduction initiatives.

"We have line of sight to over $500 million of incremental cost savings in 2025, and we believe that we have the opportunity to drive $2 billion worth of cost savings over time," Chief Financial Officer Thomas Cowhey told analysts during an earnings conference call in August.

CVS said Friday that it expects the third quarter's medical benefit ratio to be 95.2%, including a 220-basis-point impact from the PDRs. The company saw medical costs "in excess" of those previously estimated.

"In light of continued elevated medical cost pressures in the health care benefits segment, investors should no longer rely on the company's previous guidance provided on its second-quarter 2024 earnings call," CVS said.

CVS in August lowered its full-year earnings outlook and reported an annual decline in second-quarter profit amid headwinds in its health care benefits segment. The company is scheduled to report its third-quarter results on Nov. 6.

Price: 58.66, Change: -5.01, Percent Change: -7.87