CVS Earnings: Outlook Trimmed Due to Elevated Medical Utilization in Medicare Advantage Business

Narrow-moat CVS Health delivered strong fourth-quarter results, but due to spiking medical utilization in its growing Medicare Advantage, or MA, business, the firm trimmed its 2024 outlook that was just given at its December investor day. This mild guidance adjustment does not change our $103 fair value estimate, and we continue to view CVS shares as significantly undervalued. Shares appear to be rising in the belief that pricing on its CVS's outsize MA membership growth in 2024 will not have a more significant effect on its near-term outlook. That appears in contrast to the much steeper projected consequences at MA-focused Humana in 2024, and that difference is probably related to CVS' more diversified business mix.