CVS tops quarterly estimates, reaffirms revenue outlook as turnaround plan takes impact – Company Technique & Outlook

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

“’24 was a troublesome yr 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 revenue coming in between $7 to $7.20 per share. That is in keeping with the $7.17 per share that analysts had been anticipating, in accordance with LSEG. 

Newman additionally mentioned the corporate is sustaining its 2026 income steering of no less than $400 billion. Analysts anticipate income of $409.77 billion, in accordance with LSEG, although it is unclear if these estimates account for all the headwinds Newman cited.

He mentioned that steering 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 yr. 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 corporations in current months.

CVS final week mentioned its greater than 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 aim 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 purchasers, “so we do not see these as form of adversarial relationships.”

CVS beforehand mentioned it expects progress this yr 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 “bettering its profitability” this yr. 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 tail winds, equivalent to new technological investments and the places and new clients CVS acquired from Ceremony Help final yr after it filed for chapter.

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

Here is what CVS reported for the fourth quarter in contrast with what Wall Road was anticipating, primarily based 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 internet earnings of $2.92 billion, or $2.30 per share, for the fourth quarter. That compares with internet earnings of $1.62 billion, or $1.30 cents per share, for a similar interval a yr in the past. 

Excluding sure objects, equivalent to restructuring costs and capital losses, adjusted earnings had 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 yr in the past, as all three of its enterprise segments confirmed progress. 

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

Newman mentioned that the unit delivered a “very robust” quarter and that he expects one other yr of margin enchancment, primarily pushed by Medicare Benefit. The corporate’s enterprise for these privately run Medicare plans is “persevering with the trail in the 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 yr as extra Medicare Benefit sufferers return to hospitals for procedures they delayed through the pandemic. Whereas medical prices stay excessive, Aetna and different insurers, equivalent to UnitedHealthcare, seem like changing into higher outfitted to navigate the problem transferring ahead.

Nonetheless, Newman mentioned, “we are going to proceed the elevated traits. … I do not assume it is too early to imagine something aside 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 yr, at 94.8%. A decrease ratio sometimes signifies that an organization collected extra in premiums than it paid out in advantages, leading to larger profitability.

Newman mentioned the largest 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 price timing following adjustments beneath the Inflation Discount Act, which altered the standard seasonal sample of prescription spending.

Final month, shares of Medicare Benefit insurers took successful after the Trump administration proposed almost flat authorities fee charges to these plans in 2027. Newman mentioned he doesn’t consider that the proposed fee displays medical price traits.

CVS has began a dialogue with the Facilities for Medicare & Medicaid Providers earlier than the company finalizes the speed discover to start with 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 yr earlier.

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

That unit dispenses prescriptions in CVS’ greater than 9,000 retail pharmacies and offers different companies, equivalent to vaccinations and diagnostic testing.

CVS’ well being companies 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 are coated by insurance coverage, and reimburses pharmacies for prescriptions.