CVS Health Corp. (CVS) saw its share price plummet Tuesday morning after it lowered earnings guidance for 2016 and reported an expected loss of prescriptions in 2017 as a part of its third quarter results.
Shares fell nearly 16% ahead of market's open, but bounced back slightly, hitting $72.47 per share, a drop of 13% since yesterday's close price. CVS' results came as a shock to investors, who began a sell off before markets opened Tuesday.
"While this earnings season has taught us in healthcare that gloom and doom is around every quarter, this was a shocking outcome for CVS despite materially lowered expectations," Evercore analyst Ross Muken wrote in a note.
The retail pharmacy and pharmacy benefit manager announced that it will lower its full year guidance for 2016 from $5.81-$5.89 per share to $5.77-$5.83 per share. CVS also projected a loss of 40 million prescriptions for 2017.
"Obviously we're not happy with our outlook for 2017," CEO and president of the company, Larry Merlo said during the company's third quarter earnings call Tuesday morning.
CVS lost prescriptions to Walgreens Boots Alliance (WBA) , particularly through the military's Tricare program and Prime Therapeutics, both of which now restrict patient access to CVS.
The big surprise, though, wasn't the fact that CVS lost those prescriptions.
""What is a surprise is the profitability impact of these lost scripts," Mizuho analyst Ann Hynes wrote in a note. "Given most of the lost scripts are government, we had assumed a lower gross profit than the company average."