A bold comeback story is unfolding at CVS Health, a healthcare giant that's turning things around. The company's latest quarterly earnings and revenue beat estimates, and they're sticking to their 2026 profit forecast, which has investors feeling optimistic.
CVS CFO Brian Newman sums it up: "2024 was tough, but 2025 has been a turnaround year."
Here's the deal: CVS operates one of the largest pharmacy chains in the US, and they're projecting full-year profits between $7 and $7.20 per share. That's right in line with analyst expectations.
Newman also confirmed their 2026 revenue guidance of at least $400 billion, but there's a catch. He mentioned $20 billion in headwinds, including their exit from the Affordable Care Act's individual exchange market and adjusting to lower drug prices due to President Trump's "most favored nation" deals with pharma companies.
But here's where it gets controversial: CVS is accepting discount cards from TrumpRx, the president's direct-to-consumer platform, for eligible patients. Newman says they share the goal of reducing costs, and the lower prices set a new starting point for negotiations.
CVS expects growth this year, driven by the recovery of their Aetna insurance business and Caremark, their pharmacy benefit manager. They've also improved profitability at Oak Street Health, a primary care provider, and have several tailwinds for their retail pharmacy business.
Investors have rewarded CVS for its bold restructuring moves under CEO David Joyner, who took the helm in late 2024. The company has cut costs, reshuffled leadership, and exited weaker markets, resulting in a 40% stock rise over the past year.
Here's a breakdown of their fourth-quarter performance compared to Wall Street expectations:
- Earnings per share: $1.09 adjusted vs. 99 cents expected
- Revenue: $105.69 billion vs. $103.59 billion expected
CVS posted a net income of $2.92 billion, or $2.30 per share, for the quarter, up from $1.62 billion, or $1.30 cents per share, a year ago. Adjusted earnings, excluding certain items, were $1.09 per share.
Sales for the quarter were $105.69 billion, an 8.2% increase from the previous year, with growth across all three business segments.
The insurance business brought in $36.29 billion in revenue, a 10% jump from the fourth quarter of 2024. Newman expects another year of margin improvement, primarily driven by Medicare Advantage.
Aetna and other insurers have been dealing with higher medical costs as more Medicare Advantage patients return to hospitals for delayed procedures. While costs remain high, insurers seem better equipped to manage this moving forward.
The insurance segment's medical benefit ratio remained consistent at 94.8%, indicating stable profitability.
CVS' pharmacy and consumer wellness division posted $37.66 billion in sales, a 12.4% increase from the previous year, driven by higher prescription volume and the acquisition of prescriptions from Rite Aid.
The health services segment, which includes Caremark, generated $51.24 billion in revenue, a 9% increase. Caremark negotiates drug discounts, creates medication lists, and reimburses pharmacies.
And this is the part most people miss: CVS has started a dialogue with the Centers for Medicare and Medicaid Services regarding the proposed rate notice for 2027. Newman believes the proposed rate doesn't reflect medical cost trends.
So, what's your take on CVS' turnaround plan? Do you think they're on the right track? Share your thoughts in the comments!
