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Shares of Carvana popped more than 30% during after-hours trading Wednesday after the automaker reported record results and turned a profit during the first quarter.
The company’s gross profit per unit, or GPU, which is closely watched by investors, was $6,432. Carvana’s adjusted EBITDA profit margin for the quarter was 7.7%.
The results follow a major restructuring over the past two years to focus on profitability rather than growth after bankruptcy concerns in 2022.

Vehicles are seen on display at a Carvana dealership in Austin, Texas, on Feb. 20, 2023.
Brandon Bell | Getty Images

Shares of Carvana popped more than 30% during after-hours trading Wednesday after the automaker reported record results and turned a profit during the first quarter.
Here is how the company performed in the first quarter, compared with average estimates compiled by LSEG:

Earnings per share: 23 cents — it was not immediately clear if it was comparable to the loss of 74 cents expected
Revenue: $3.06 billion vs. $2.67 billion expected

Carvana reported record first-quarter net income of $49 million, compared to a $286 million loss during the prior-year period. It also posted an all-time-best adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, of $235 million, up from a $24 million loss a year earlier.
The company’s gross profit per unit, or GPU, which is closely watched by investors, was $6,432. Carvana’s adjusted EBITDA profit margin for the quarter was 7.7%.
Carvana’s net income included a roughly $75 million gain in the fair value of Carvana’s warrants to acquire Root Inc. common stock. This did not impact its GPU or adjusted EBITDA.
“In the first quarter, we delivered our best results in company history, validating our long-held belief that Carvana’s online retail model can drive industry-leading profitability while delivering industry-leading customer experiences,” Carvana CEO and Chairman Ernie Garcia III said in a release.
Garcia said the company’s performance was driven by efficiency gains in its operations, especially the reconditioning of vehicles for sale as well as selling, general, and administrative expenses, among other areas.

Carvana expects to continue to grow its adjusted EBITDA profit margin further as the company continues to grow, according to Garcia. He declined to disclose how much high the company believes it can grow those results.

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Carvana’s stock in 2024

“I really do think in terms of just a single quarter carrying meaning about what the future holds for us. If we execute properly, I think this is probably our biggest quarter and it feels awesome,” Garcia told CNBC during a phone interview Wednesday night.
The company anticipates further cost reductions or efficiency gains to increase profitability through areas such as advertising as well as overhead and operational expenses.
Garcia said Carvana also is working on increasing vehicle reconditioning and profitably rebuilding its vehicle inventory, which was nearing an all-time monthly low of 13 days’ supply in March. It has increased its reconditioning capacity of vehicles to prepare for sale by roughly 60% during the past year.
“Acquiring inventories, generally speaking, feel relatively straightforward to scale, but growing the recondition capacity is difficult,” he told CNBC. “Inventory today is certainly tighter than we would like for it to be. We’re working hard to build it back up, but we’re extremely well positioned to do it.”
The results follow a major restructuring by the company over the past two years to focus on profitability rather than growth, after bankruptcy concerns when Carvana’s stock lost nearly all of its value in 2022.
Shares of the company have recovered since then. They had climbed roughly 67% year to date before the company reported its first-quarter results. The stock closed Wednesday up about 5% at $87.09 per share.
A joint letter to shareholders from Garcia and finance chief Mark Jenkins said the company has prioritized growth, but doing so profitability.
“We are now focused on our long-term phase of driving profitable growth and pursuing our goal of becoming the largest and most profitable auto retailer and buying and selling millions of cars,” read the shareholder letter.
For the second quarter, the company said it expects a sequential increase in its year-over-year growth rate in retail units, and a sequential increase in adjusted earnings before interest, taxes, depreciation and amortization.

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Starbucks, Pizza Hut and KFC are among the chains that reported same-store sales declines this quarter.
McDonald’s said it’s adopting a “street-fighting mentality” to creating value to win over customers.
Outliers like Wingstop and Chipotle Mexican Grill show that customers will still order their favorite foods, even if they’re more expensive than they were a year ago.

A Starbucks logo is seen as members and supporters of Starbucks Workers United protest outside of a Starbucks store in Dupont Circle, Washington, D.C., on Nov. 16, 2023.
Kevin Dietsch | Getty Images

It’s finally here: the long-predicted consumer pullback.
Starbucks announced a surprise drop in same-store sales for its latest quarter, sending its shares down 17% on Wednesday. Pizza Hut and KFC also reported shrinking same-store sales. And even stalwart McDonald’s said it has adopted a “street-fighting mentality” to compete for value-minded diners.

For months, economists have been predicting that consumers would cut back on their spending in response to higher prices and interest rates. But it’s taken a while for fast-food chains to see their sales actually shrink, despite several quarters of warnings to investors that low-income consumers were weakening and other diners were trading down from pricier options.
Many restaurant companies also offered other reasons for their weak results this quarter. Starbucks said bad weather dragged its same-store sales lower. Yum Brands, the parent company of Pizza Hut, KFC and Taco Bell, blamed January’s snowstorms and tough comparisons to a strong first quarter last year for its brands’ poor performance.
But those excuses don’t fully explain the weak quarterly results. Instead, it looks like the competition for a smaller pool of customers has grown fiercer as the diners still looking to buy a burger or cold brew become pickier with their cash.
The cost of eating out at quick-service restaurants has climbed faster than that of eating at home. Prices for limited-service restaurants rose 5% in March compared with the year-ago period, while prices for groceries have been increasing more slowly, according to the Bureau of Labor Statistics.
“Clearly everybody’s fighting for fewer consumers or consumers that are certainly visiting less frequently, and we’ve got to make sure we’ve got that street-fighting mentality to win, irregardless of the context around us,” McDonald’s CFO Ian Borden said on the company’s conference call on Tuesday.

Outliers show that customers will still order their favorite foods, even if they’re more expensive than they were a year ago. Wingstop, Wall Street’s favorite restaurant chain, reported its U.S. same-store sales soared 21.6% in the first quarter. Chipotle Mexican Grill, whose customer base is predominantly higher income, saw traffic rise 5.4% in its first quarter. And Restaurant Brands International’s Popeyes reported same-store sales growth of 5.7%.
“What we’ve seen with the consumer is, if they are feeling pressure, they have a tendency to pull back on more high-frequency [quick-service restaurant] occasions,” Wingstop CEO Michael Skipworth told CNBC.
He added that the average Wingstop customer visits just once a month, using the chain’s chicken sandwich and wings as an opportunity to treat themselves rather than a routine that can easily be cut due to budget concerns. Skipworth also said that Wingstop’s low-income consumers are actually returning more frequently these days.
Even so, many companies in the restaurant sector and beyond it have warned consumer pressures could persist. McDonald’s CEO Chris Kempczinski told analysts the spending caution extends worldwide.
“It’s worth noting that in [the first quarter], industry traffic was flat-to-declining in the U.S., Australia, Canada, Germany, Japan and the U.K.,” he said.
Two of the chains that struggled in the first quarter cited value as a factor. Starbucks CEO Laxman Narasimhan said occasional customers weren’t buying the chain’s coffee because they wanted more variety and value.
“In this environment, many customers have been more exacting about where and how they choose to spend their money, particularly with stimulus savings mostly spent,” Narasimhan said on the company’s Tuesday call.
Yum CEO David Gibbs noted that rivals’ value deals for chicken menu items hurt KFC’s U.S. sales. But he said the shift to value should benefit Taco Bell, which accounts for three-quarters of Yum’s domestic operating profit.
“We know from the industry data that value is more important and that others are struggling with value, and Taco Bell is a value leader. You’re seeing some low-income consumers fall off in the industry. We’re not seeing that at Taco Bell,” he said on Wednesday.
It’s unclear how long it will take fast-food chains’ sales to bounce back, although executives provided optimistic timelines and plans to get sales back on track. For example, Yum said its first quarter will be the weakest of the year.
For its part, McDonald’s plans to create a nationwide value menu that will appeal to thrifty customers. But the burger giant could face pushback from its franchisees, who have become more outspoken in recent years. While deals drive sales, they pressure operators’ profits, particularly in markets where it is already expensive to operate.
Still, losing ground to the competition could motivate McDonald’s franchisees. This marks the second consecutive quarter that Burger King reported stronger U.S. same-store sales growth than McDonald’s. The Restaurant Brands chain has been in turnaround mode over the last two years and spending heavily on advertising.
Starbucks is also betting on deals. The coffee chain is gearing up to release an upgrade of its app that allows all customers — not just loyalty members – to order, pay and get discounts. Narasimhan also touted the success of its new lavender drink line that launched in March, although business was still sluggish in April.

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Viking started trading on the New York Stock Exchange on Wednesday at $26.15 under the ticker “VIK.”
The company’s IPO coincides with a strong rebound in cruise bookings.

A trader works inside a booth, as screens display Viking cruise company logo, on the floor of the New York Stock Exchange. 
Stefan Jeremiah | Reuters

Viking is not your typical cruise operator.
Aboard its smaller, upscale vessels, you won’t find any kids. In fact, the cruise line doesn’t hide the fact that it is going after the high-income baby boomer.

Casinos? Not on these cruise ships.
In Viking Holdings’ prospectus, the company said its cruises are for the “thinking person,” underscoring its efforts to appeal to the baby boomer traveler who seeks adventure and new experiences.
“They have the money, they have the time and, in my belief, the moment you try to do everything for everybody, you know what happens? You do nothing well. So we are very, very clear focused,” Torstein Hagen, CEO and chairman of Viking, told CNBC.

The luxury cruise line was targeting a $10.4 billion valuation in its initial public offering on the New York Stock Exchange on Wednesday, making it the third-largest cruise operator after Royal Caribbean and Carnival. Norwegian Cruise Line is the fourth largest. Viking started trading Wednesday at $26.15 a share under the ticker “VIK” after pricing at $24 a share.
It closed its first trading day with a gain of more than 8%, ending at $26.10 per share.

Viking upsized its IPO after existing shareholders decided to sell an additional 9 million shares amid strong demand from mutual fund investors, according to a source familiar with the situation.

A trader walks past a screen which displays the Viking cruise company logo, on the floor of the New York Stock Exchange.
Stefan Jeremiah | Reuters

In 1997, Viking had four ships. It has quickly grown its fleet to 92 vessels, 80 of which are river-based ships that travel down the world’s biggest rivers, including the Seine in France and the Nile in Egypt.
“We’re different because when you talk about the big cruise lines, they’re large in the Caribbean,” Hagen said. “We have a tiny sliver in the Caribbean. The rest is Europe.”
The timing of Viking’s IPO coincides with a strong rebound in cruise bookings. On April 25, Royal Caribbean raised its guidance for 2024 amid a bright outlook for the sector.
“Cruising has really come into the forefront as a competitive choice in travel,” Jason Liberty, CEO of Royal Caribbean, said to CNBC in a recent interview. “The overall travel industry is $1.9 trillion. The cruise industry is $56 billion of that. I think cruising is at a much different level than it was pre-pandemic.”
While the company’s prospectus showed Viking brought in $4.71 billion in sales in 2023, it did report a net loss for the year. What is getting investors excited is the company’s revenue per passenger of $7,251, which is much higher than that of any other publicly traded cruise line. Viking’s premium price point allows it to make more money on each customer.
Investors will also be looking for details on Viking’s expansion plans. Earlier this month, Norwegian Cruise Line said it ordered eight new ships scheduled for delivery over the next 12 years.

A model of a Viking cruise ship is displayed at the New York Stock Exchange.
Stefan Jeremiah | Reuters

Carnival, Royal Caribbean and MSC Cruises all have robust portfolios, which has raised concerns of overcapacity weighing on demand. But for now, the industry is focused on how well demand has rebounded from the pandemic and that, even with higher prices, cruising is still cheaper on average than hotel vacations.
UBS leisure analyst Robin Farley said land-based hotel rates are 25% higher than in 2019. During that same time frame, cruise line rates are up 10%.
“The gap between cruising and hotels is wide. That makes cruise compelling right now,” Farley said.

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Bally Sports regional networks went dark for Comcast cable customers early Wednesday, a month into MLB’s regular season, as carriage negotiations broke down with the channels’ bankrupt operator Diamond Sports Group.
Comcast’s Xfinity pay-TV customers will automatically receive $8 to $10 a month in credits, the cable company said.
The carriage spat presents another pain point for Diamond Sports — which is looking to emerge from bankruptcy this year — as well as for the beleaguered regional sports network industry.

A Bally Sports display is shown in the eighth inning of the game between the Houston Astros and Minnesota Twins at Target Field on April 9, 2023 in Minneapolis, Minnesota. The Astros defeated the Twins 5-1.
David Berding | Getty Images Sport | Getty Images

Comcast customers on Wednesday lost access to Bally Sports’ regional networks a month into MLB’s regular season.
Fans of 11 MLB teams, including the Detroit Tigers and Minnesota Twins, lost access to the networks that air local games early Wednesday. With the NBA and NHL postseasons in full swing, fans of teams in those leagues won’t feel the effect until next season if the blackout continues until then.

Negotiations between Comcast and Bally Sports’ operator Diamond Sports Group, which has been under bankruptcy protection since last year, broke down following a dispute over terms. Comcast provides cable and internet services under the Xfinity brand.
The blackout marks another pain point for the regional sports network business, which has faced pressure as consumers cut pay-TV subscriptions in favor of streaming.

MLB teams no longer available to Comcast customers

Detroit Tigers
Miami Marlins
Cincinnati Reds
St. Louis Cardinals
Tampa Bay Rays
Texas Rangers
Atlanta Braves
Los Angeles Angels
Kansas City Royals
Minnesota Twins
Milwaukee Brewers
*Note: Comcast is not a provider in all of these teams’ markets.

A Diamond spokesperson said in a statement on Tuesday that Comcast “refused to engage in substantive discussions” despite Diamond offering terms similar to those reached with other distributors.
“We are a fans-first company and will continue to seek an agreement with Comcast to restore broadcasts, and at this critical juncture for Diamond, we hope that Comcast will recognize the important and mutually beneficial role Diamond and RSNs play in the media ecosystem,” a Diamond spokesperson said in the statement.
Diamond’s agreement with Comcast expired in the fall, but the two companies agreed to a six-month extension at the time. A Comcast spokesperson said in a statement that Diamond had the right to extend the deal by another year, “which they opted not to exercise.”
“We’d like to continue carrying their networks, but they have declined multiple offers and now we no longer have the rights to this programming,” the statement said. Comcast said it will provide affected customers with $8 to $10 per month in credits.
Late Tuesday, Diamond said Comcast “rejected a proposed extension that would have kept our channels on the air.” The offer would have been open-ended and kept the networks on the air while negotiations continued with the aim of inking a multiyear agreement, a person familiar with the matter said.
Conversations broke down primarily over how quickly Comcast could shift the Bally Sports networks into a tiered model, meaning customers would have to opt into packages that include the channels at a higher rate rather than having them included in broader cable packages.
Pay-TV distributors have been losing customers at a fast clip in recent years as customers opt for cheaper streaming options. Comcast had more than 13.6 million pay-TV customers as of March 31, after losing 487,000 subscribers during the first quarter.
Some regional sports networks have begun offering streaming options to customers at a price point that doesn’t upend the pay-TV model. Diamond has the streaming rights to five of the MLB teams that lost service on Comcast.
Carriage deals with distributors are considered key to ensuring a viable business plan and future for Diamond. In addition to Comcast, Diamond has held negotiations in recent weeks with Charter Communications — which provides pay-TV services under the Spectrum brand — DirecTV and Cox Communications.
Diamond has so far signed multiyear deals with Charter and Cox. On Wednesday, DirecTV said it also reached a deal with Diamond to continue carrying the networks. The deals extend the terms of the current agreements, with a shift to a tiered model over time, people close to the situations said.
While Diamond and internet-TV bundle FuboTV also signed a multiyear deal in December, the Bally Sports networks are absent from other major internet-TV providers, such as Google’s YouTube TV and Disney’s Hulu+ Live TV.
Diamond filed for bankruptcy last March. In the time since, it has rejected rights agreements with some teams, including MLB’s San Diego Padres and the NBA’s Phoenix Suns, which signed a deal to air games through local broadcast stations.
The largest operator of regional sports networks is looking to emerge from bankruptcy in the coming months under the ownership of its creditors and has a hearing to confirm its reorganization plan scheduled in June.
Disclosure: Comcast is the parent company of NBCUniversal and CNBC.

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TO GIRD YOURSELF for Auto China 2024, a nine-day motor show which ends on May 4th in Beijing, get there by car. On the opening day, navigating the human traffic eager to glimpse the mechanical marvels on display required the same tenacity as negotiating the Chinese capital’s gridlocked roads. Helpfully, the ride to the venue is also useful preparation for understanding the intense competition gripping China’s car industry—which the jamboree itself further underscores.Both on Beijing streets and at the motor show, most of the vehicles are electric. And Chinese marques, some more familiar to overseas visitors than others, and local technology champions such as Huawei and Xiaomi, better known for gizmos you carry than those that carry you, are edging out the foreign manufacturers that once dominated the domestic market. More

Pfizer reported first-quarter revenue that beat expectations and hiked its full-year profit outlook, benefiting from its broad cost-cutting program and strong sales of its non-Covid products.
The pharmaceutical giant’s quarterly results also benefited from a smaller-than-feared drop in sales for its Covid antiviral pill Paxlovid.
The results come as Pfizer tries to regain its footing after the rapid decline of its Covid business.

Jakub Porzycki | Nurphoto | Getty Images

Pfizer on Wednesday reported first-quarter revenue that beat expectations and hiked its full-year profit outlook, benefiting from its broad cost-cutting program, a smaller-than-feared drop in sales of its Covid antiviral pill Paxlovid and strong non-Covid product sales.
The company now expects to book adjusted earnings of $2.15 to $2.35 per share for the fiscal year, up from its prior guidance of $2.05 to $2.25 per share. Pfizer reiterated its previous revenue forecast of $58.5 billion and $61.5 billion, which it first outlined in mid-December. 

The pharmaceutical giant said its new profit guidance accounts for its “confidence” in its business and its ability to slash costs. Pfizer said it is on track to deliver at least $4 billion in savings by the end of the year.
The results come as Pfizer tries to regain its footing after the rapid decline of its Covid business. Demand for those products has plunged to new lows, and they transitioned to the commercial market in the U.S. last year. As revenue suffers, the company is trying to improve its bottom line and shore up investor confidence through its cost cuts and a renewed focus on treating cancer after its $43 billion acquisition of Seagen last year. 
Here’s what Pfizer reported for the first quarter compared with what Wall Street was expecting, based on a survey of analysts by LSEG: 

Earnings per share: 82 cents adjusted, it was not immediately clear if it is comparable to the 52 cents expected.
Revenue: $14.88 billion vs. $14.01 billion expected.

Pfizer recorded first-quarter revenue of $14.88 billion, down 20% from the same period a year ago, primarily because of the plunge in sales of its Covid products.
For the first quarter, Pfizer booked net income of $3.12 billion, or 55 cents per share. That compares with net income of $5.54 billion, or 97 cents per share, during the same period a year ago. 

Excluding certain items, the company posted earnings per share of 82 cents for the quarter. 
Notably, the company said its adjusted and nonadjusted profit got an 11 cents per share boost from a $771 million final adjustment to the estimated $3.5 billion revenue reversal recorded in the fourth quarter, reflecting 5.1 million courses of Paxlovid returned by the U.S. government by Feb. 29. 
Paxlovid booked $2 billion in revenue for the quarter, down 50% from the same period a year ago. That decline was mainly because of lower deliveries around the world as the product transitioned to commercial market sales, along with lower demand in China. 
Meanwhile, Pfizer’s Covid vaccine generated $354 million in sales, down 88% from the year-earlier period. That drop was also driven by lower contract deliveries and demand in international markets, as well as lower U.S. volumes, partly reflecting the seasonality of demand for vaccinations.
Shares of Pfizer fell roughly 40% in 2023 as demand for Paxlovid and its vaccine against the virus dried up, causing the company to dramatically slash its full-year revenue forecast and record multibillion-dollar charges related to inventory write-offs. Pfizer also disappointed the Street with an underwhelming launch of a new RSV shot and a twice-daily weight loss pill that fell short in clinical trials. 

Non-Covid product strength

Excluding Covid products, Pfizer said revenue for the first quarter rose 11%.
The company said that growth was partly fueled by Seagen’s products, which brought in $742 million in revenue for the quarter. That includes a targeted treatment for bladder cancer called Padcev and another drug that treats certain lymphomas. 
Pfizer completed its acquisition of the drugmaker in December. 
The company said revenue also got a boost from strong sales of Vyndaqel drugs, which are used to treat a certain type of cardiomyopathy, a disease of the heart muscle. Those drugs booked $1.14 billion in sales, up 66% from the first quarter of 2024.
Analysts surveyed by FactSet had expected that group of drugs to rake in $909.1 million for the quarter. 
Pfizer also said its blood thinner Eliquis, which is co-marketed by Bristol Myers Squibb, helped drive revenue growth. The drug posted $2.04 billion in revenue for the quarter, up 9% from the same period a year ago. 

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Analysts had expected Eliquis to take in $1.95 billion in sales, according to FactSet.
A group of shots to protect against pneumococcal pneumonia brought in $1.69 billion in sales for the first quarter, up 6% from the year-ago period. That growth was driven by uptake among children in the U.S. and government purchases, among other factors. 
Analysts had expected that group of shots to book $1.63 billion in sales for the quarter, FactSet estimates said.
Meanwhile, Pfizer’s new vaccine against respiratory syncytial virus, or RSV, saw $145 million in revenue, primarily driven by uptake among older adults. The shot, known as Abrysvo, entered the market during the third quarter for seniors and expectant mothers who can pass on protection to their fetuses. 
The vaccine fell short of analysts’ estimate of $360 million in revenue for the first quarter, according to FactSet.
Pfizer’s medication for certain breast cancers, Ibrance, generated $1.05 billion in revenue for the period, down 8% from the same period a year ago. The decline came as the drug faced competitive pressure and price decreases in certain international markets.  
Revenue from that drug was roughly in line with what analysts were expecting. 

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CVS Health on Wednesday reported first-quarter revenue and adjusted earnings that missed expectations.
The company also lowered its full-year profit outlook, citing higher medical costs that are dogging the broader U.S. insurance industry.
Insurers have been seeing medical costs spike as an increasing number of Medicare Advantage patients return to hospitals to undergo procedures they had delayed during the pandemic.

CVS Health on Wednesday reported first-quarter revenue and adjusted earnings that missed expectations and slashed its full-year profit outlook, citing higher medical costs that are dogging the U.S. insurance industry.
Shares of the company dropped 10% in premarket trading.

The drugstore chain expects 2024 adjusted earnings of at least $7 per share, down from a previous guidance of at least $8.30 per share. Analysts surveyed by LSEG were expecting full-year adjusted profit of $8.28 per share. 
CVS also cut its unadjusted earnings guidance to at least $5.64 per share, down from at least $7.06 per share. 
The company said its new outlook assumes that higher medical costs in its insurance business during the first quarter will persist throughout the year. CVS owns health insurer Aetna. 
Still, CVS CEO Karen Lynch said in a statement that the “the current environment does not diminish our opportunities, enthusiasm, or the long-term earnings power of our company.” CVS is confident “we have a pathway to address our near-term Medicare Advantage challenges,” she added.
Insurers such as Humana and UnitedHealth Group have seen medical costs spike as more Medicare Advantage patients return to hospitals for procedures they delayed during the pandemic, such as joint and hip replacements. 

Medicare Advantage, a privately run health insurance plan contracted by Medicare, has long been a key source of growth and profits for the insurance industry. But investors have become more concerned about the runaway costs associated with those plans, which cover more than half of all Medicare beneficiaries. 
Here’s what CVS reported for the first quarter compared with what Wall Street was expecting, based on a survey of analysts by LSEG: 

Earnings per share: $1.31 adjusted vs. $1.69 expected
Revenue: $88.44 billion vs. $89.21 billion expected

CVS reported net income of $1.12 billion, or 88 cents per share, for the first quarter. That compares with net income of $2.14 billion, or $1.65 per share, for the same period a year ago. 
Excluding certain items, such as amortization of intangible assets and capital losses, adjusted earnings per share were $1.31 for the quarter.
CVS booked sales of $88.44 billion for the quarter, up nearly 4% from the year-earlier period. That increase was driven by its pharmacy business and insurance unit. 
Meanwhile, CVS said sales in its health services segment, which includes the pharmacy benefit manager Caremark, declined during the period. That was mainly due to the loss of a large unnamed client, the company noted. 
In January, Tyson Foods said it had dropped CVS’ Caremark and instead chose PBM startup Rightway to manage drug benefits for its 140,000 employees starting this year. That came months after Blue Shield of California, one of the largest insurers in the nation’s most populous state, also dropped Caremark and instead partnered with Amazon Pharmacy and Mark Cuban’s Cost Plus Drugs company. 
Those decisions add to an upheaval in the health-care industry, as startups promising lower costs and transparency challenge the largest PBMs and pressure them to change their own business models. 
The first-quarter results come as CVS pushes to transform from a major drugstore chain into a large health-care company. CVS deepened that push over the last year with its nearly $8 billion acquisition of health-care provider Signify Health and a $10.6 billion deal to buy Oak Street Health, which operates primary-care clinics for seniors.

Pressure on insurance unit

CVS’ health insurance segment generated $32.24 billion in revenue during the quarter, a more than 24% increase from the first quarter of 2023. The division includes plans by Aetna for the Affordable Care Act, Medicare Advantage and Medicaid, as well as dental and vision.
Sales blew past analysts’ estimate of $30.69 billion for the period, according to StreetAccount. 
But the insurance division reported adjusted operating income of just $732 million for the first quarter. That is well below analysts’ expectation of $1.19 billion, according to FactSet. 

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The segment’s medical benefit ratio — a measure of total medical expenses paid relative to premiums collected — increased to 90.4% from 84.6% a year earlier. A lower ratio typically indicates that the company collected more in premiums than it paid out in benefits, resulting in higher profitability.
Analysts had expected that ratio to be 88.4%, according to FactSet estimates. 
CVS said the rise was mainly driven by increased utilization of Medicare Advantage and the “unfavorable impact” of the company’s Medicare Advantage star ratings. Those ratings help Medicare patients compare the quality of Medicare health and drug plans. 
CVS added that an additional day in 2024 due to the leap year also contributed to the higher medical benefit ratio. 

Health services, pharmacy businesses miss

A workers stocks the shelves in a CVS pharmacy store on February 07, 2024 in Miami, Florida. 
Joe Raedle | Getty Images

The company’s health services segment generated $40.29 billion in revenue for the quarter, a nearly 10% drop compared with the same quarter in 2023. 
The division includes CVS Caremark, which negotiates drug discounts with manufacturers on behalf of insurance plans, along with health-care services delivered in medical clinics, through telehealth and at home.
Those sales were in line analysts’ estimate of $40.29 billion in revenue for the period, according to FactSet. 
CVS said the decline was driven in part by the loss of the unnamed client and “continued pharmacy client price improvements.” The decrease was partially offset by growth in Oak Street Health, Signify Health and specialty pharmacy services, which help patients who are suffering from complex disorders and require specialized therapy. 
The health services division processed 462.9 million pharmacy claims during the quarter, down from the 587.3 million during the year-ago period. 
CVS’ pharmacy and consumer wellness division booked $28.73 billion in sales for the first quarter, up almost 3% from the same period a year earlier. That segment dispenses prescriptions in CVS’ more than 9,000 brick-and-mortar retail pharmacies and provides other pharmacy services, such as diagnostic testing and vaccination. 
Analysts had expected the division to bring in $29.5 billion in sales, according to FactSet. 
The company said the rise was primarily driven by heightened prescription volume, including increased contributions from vaccinations. Pharmacy reimbursement pressure, the launch of new generic drugs and decreased front-store volume, among other factors, weighed on the division’s sales. 

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Johnson & Johnson said it will pay $6.5 billion to settle nearly all of the thousands of lawsuits in the U.S. claiming its talc-based products caused ovarian cancer.
The deal would allow J&J to resolve the lawsuits through a third bankruptcy filing of a subsidiary company, LTL Management. 
J&J said the remaining pending lawsuits relate to a rare cancer called mesothelioma and will be addressed outside of the new settlement plan. 

Johnson & Johnson on Wednesday said it will pay $6.5 billion to settle nearly all of the thousands of lawsuits in the U.S. claiming its talc-based products caused ovarian cancer.
The deal would allow J&J to resolve the lawsuits through a third bankruptcy filing of a subsidiary company, LTL Management. 

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It will begin a three-month voting period for claimants, in hopes of reaching a consensus on a settlement of all current and future ovarian cancer claims. About 99% of the talc-related lawsuits filed against J&J and its subsidiaries stem from ovarian cancer. 
J&J said the remaining pending lawsuits relate to a rare cancer called mesothelioma and will be addressed outside of the new settlement plan. 
The pharmaceutical giant said it has already resolved 95% of mesothelioma lawsuits filed to date.

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