CVS Kicks CEO to the Curb, Warns of Profit Flop, and Stock Plunges 6% (All In One Day)

CVS has been in the news a lot lately, just not the kind that you brag about. If this were a TV show, it’d be called “How to Lose Investors in 10 Days.” Their latest move? Kicking CEO Karen Lynch to the curb while also dropping a profit forecast so bleak it’s like getting socks and a sweater for Christmas. Naturally, the stock tanked faster than my interest in the WNBA playoffs and ended the day at a 6% loss.

So, what’s going on? CVS, the largest pharmacy giant in the world, has been having a year (like a never-ending Monday kind of year). Stock’s down almost 30%, costs are soaring, and now the company’s sending Wall Street a “please don’t look at us” signal with a profit outlook so bad, you almost feel sorry for them. Almost.

To make matters worse, the Biden administration decided to pull back on Medicare reimbursements, and, well, that’s not great when you run a company whose insurance arm (hey, Aetna) depends on Medicare like a newborn depends on milk. The government cut payments to Medicare Advantage insurers by 3.7% for next year. For context, that’s like expecting a pay raise and finding out you owe the company money instead.

David Joyner has officially stepped in as CVS’s new CEO, and he's looking at a corporate to-do list that’s longer than a CVS receipt. His main challenge? Aetna’s medical costs, which jumped nearly 10% last year alone, mainly because the 65-and-older crowd is hitting up healthcare services like they're collecting social security checks.

CVS now expects its medical-benefit ratio (MBR)—the fancy term for “how much money we’re spending on patient care”—to hit a painful 95.2%. A year ago? It was 85.7%. 

If that doesn’t hurt enough, CVS’s earnings outlook for Q3 is now between $1.05 and $1.10 per share. Wall Street was dreaming of $1.70, but hey, shattered dreams are part of the CVS experience at this point. And just for fun, CVS also yanked its full-year profit forecast because… why not? 

This dumpster fire isn’t exactly new, though. CVS has been laying off people like it’s a sport—nearly 2,900 jobs gone—and closing stores at a rapid clip (244 down so far). If you thought that was enough drama, they’ve also been under investigation for, wait for it, inflating insulin prices. That’s right, jacking up the cost of life-saving meds while struggling with their own survival. Nice.

Oh, and if you’re wondering about that activist investor pressure to split CVS into two companies? Yeah, they crushed that idea on Friday, too. They’re sticking with the “one big mess” model for now.

So, what’s next for CVS? Joyner said in a memo that the industry faces “significant and dynamic challenges.” Translation: “This is a hot mess, and I’ll need all the luck I can get.” With CVS stock tumbling over 9% at one time on Friday, investors are already bracing for more bad news.

By the way, the company’s third-quarter earnings are due on November 6th. Until then, let’s see if CVS and their new CEO can avoid making headlines for all the wrong reasons (and maybe just stick to printing those famously long receipts).

P.S. Yeah, I know it’s the weekend and you’re probably gearing up for a pumpkin patch trip with the family, but hang on—you need to know this. Wednesday’s alert went up 203%! $QNRX blew up, and premium subscribers snagged it at $0.51 before it shot up to $1.56 in under four hours. Don’t miss the next one—click here now, then you can get back to pretending you’re excited about hayrides.

Stock.News has a position in CVS as mentioned in the article.