CVS tops quarterly estimates, reaffirms profit outlook as turnaround plan takes effect

CVS Well being on Tuesday reported fourth-quarter earnings and income that beat estimates and reaffirmed the 2026 profit steerage that impressed traders, signaling regular progress within the health-care large’s turnaround plan. 

“’24 was a troublesome 12 months for the corporate. So ’25 righted the ship,” CVS CFO Brian Newman mentioned in an interview.

CVS, which operates one of many largest pharmacy chains within the U.S., sees full-year profit coming in between $7 to $7.20 per share. That is according to the $7.17 per share that analysts have been anticipating, in keeping with LSEG. 

Newman additionally mentioned the corporate is sustaining its 2026 income steerage of not less than $400 billion. Analysts anticipate income of $409.77 billion, in keeping with LSEG, although it is unclear if these estimates account for the entire headwinds Newman cited.

He mentioned that steerage contains $20 billion in headwinds, roughly half of which is pushed by the corporate’s transfer to exit the Reasonably priced Care Act particular person change market this 12 months. Newman mentioned the opposite half displays the corporate’s retail enterprise adjusting to decrease drug costs after the “most favored nation” offers that President Donald Trump struck with greater than a dozen pharma firms in current months.

CVS final week mentioned its roughly 9,000 pharmacies are accepting low cost playing cards from the president’s newly launched direct-to-consumer platform, TrumpRx, for eligible sufferers. Newman mentioned CVS shares the Trump administration’s objective of lowering prices. He added that the decrease costs set a brand new start line from which Caremark, the corporate’s pharmacy profit supervisor, can negotiate even decrease prices for its shoppers, “so we do not see these as type of adversarial relationships.”

CVS beforehand mentioned it expects progress this 12 months to be pushed by the return to focus on margins at its recovering Aetna insurance coverage enterprise, led by privately run Medicare Benefit plans, and Caremark. 

Newman added that primary-care supplier Oak Road Well being is “enhancing its profitability” this 12 months. That comes after CVS moved to shut 16 underperforming Oak Road places. For the retail pharmacy enterprise, Newman mentioned the corporate has a number of tailwinds, such as new technological investments and the places and new clients CVS acquired from Ceremony Assist final 12 months after it filed for chapter.

Traders rewarded CVS final 12 months as CEO David Joyner, who stepped into the function in late 2024, pressed forward with a sweeping restructuring aimed toward reversing years of underperformance. The corporate has lower prices, reshuffled management and exited weaker markets, serving to gasoline a roughly 40% inventory rise over the previous 12 months.

This is what CVS reported for the fourth quarter in contrast with what Wall Road was anticipating, based mostly on a survey of analysts by LSEG: 

• Earnings per share: $1.09 adjusted vs. 99 cents anticipated
• Income: $105.69 billion vs. $103.59 billion anticipated

The corporate posted web revenue of $2.92 billion, or $2.30 per share, for the fourth quarter. That compares with web revenue of $1.62 billion, or $1.30 cents per share, for a similar interval a 12 months in the past. 

Excluding sure objects, such as restructuring expenses and capital losses, adjusted earnings have been $1.09 per share for the quarter.

CVS booked gross sales of $105.69 billion for the fourth quarter, up 8.2% from the identical interval a 12 months in the past, as all three of its enterprise segments confirmed progress. 

The insurance coverage enterprise introduced in $36.29 billion in income in the course of the quarter, up greater than 10% from the fourth quarter of 2024. 

Newman mentioned the unit delivered a “very robust” quarter and that he expects one other 12 months of margin enchancment, primarily pushed by Medicare Benefit. The corporate’s enterprise for these privately run Medicare plans is “persevering with the trail in direction of goal margins” of three% to 4% by 2028, he mentioned.

Aetna and different insurers have grappled with higher-than-expected medical prices over the previous 12 months as extra Medicare Benefit sufferers return to hospitals for procedures they delayed in the course of the pandemic. Whereas medical prices stay excessive, Aetna and different insurers, such as UnitedHealthcare, look like changing into higher geared up to navigate the difficulty shifting ahead.

Nonetheless, Newman mentioned “we’ll proceed the elevated tendencies. … I do not suppose it is too early to imagine something apart from a prudent outlook.”

The insurance coverage section’s medical profit ratio — a measure of complete medical bills paid relative to premiums collected — remained constant from the prior 12 months, at 94.8%. A decrease ratio usually signifies that an organization collected extra in premiums than it paid out in advantages, leading to larger profitability.

Newman mentioned the most important driver of that ratio within the fourth quarter was Medicaid pass-through funds that hit in late December.

In a launch, CVS additionally mentioned improved efficiency within the unit’s authorities enterprise was offset by shifts in Medicare drug value timing following modifications beneath the Inflation Discount Act, which altered the standard seasonal sample of prescription spending.

Final month, shares of Medicare Benefit insurers took a success in January after the Trump administration proposed almost flat authorities cost charges to these plans in 2027. Newman mentioned he doesn’t imagine that the proposed price displays medical value tendencies.

CVS has began a dialogue with the Facilities for Medicare and Medicaid Providers earlier than the company finalizes the speed discover at first of April, he added.

CVS’ pharmacy and client wellness division posted $37.66 billion in gross sales for the fourth quarter, up 12.4% from the identical interval a 12 months earlier.

CVS mentioned the rise got here partly from larger prescription quantity, together with from the corporate’s acquisition of prescriptions from Ceremony Assist, however was offset by pharmacy reimbursement strain and the impression of some generic medication coming into the market. 

That unit dispenses prescriptions in CVS’ greater than 9,000 retail pharmacies and supplies different providers, such as vaccinations and diagnostic testing.

CVS’ well being providers section generated $51.24 billion in income for the quarter, up 9% in contrast with the identical quarter in 2024. 

That unit contains Caremark, which negotiates drug reductions with producers on behalf of insurance policy, creates lists of medicines, or formularies, which might be lined by insurance coverage, and reimburses pharmacies for prescriptions.