CVS Health delivered a stronger-than-expected fourth quarter, beating Wall Street estimates on both earnings and revenue as the company presses ahead with a multi-year turnaround.
The results underline a period of stabilisation after a challenging 2024, with management reaffirming long-term profit and revenue targets despite policy changes and pricing pressure across the healthcare sector.
Investors have closely tracked the group’s restructuring under chief executive David Joyner, who took over in late 2024, as CVS pares back weaker businesses and sharpens its focus on insurance, pharmacy, and health services.
Earnings beat, and guidance held
CVS reported adjusted earnings of $1.09 per share for the fourth quarter, above expectations of 99 cents, while revenue came in at $105.69 billion, topping forecasts of $103.59 billion, according to LSEG.
Net income rose to $2.92 billion, or $2.30 per share, compared with $1.62 billion a year earlier.
Excluding items such as restructuring charges and capital losses, earnings reflected improved execution following cost cuts and leadership changes.
The company reaffirmed full-year profit guidance of $7 to $7.20 per share and maintained its 2026 revenue target of at least $400 billion.
Management said this already factors in about $20 billion of headwinds, split between its planned exit from the Affordable Care Act individual exchange market and adjustments in the retail pharmacy business linked to lower drug prices.
Policy shifts and pricing pressure
CVS said part of the pressure stems from most-favoured-nation drug pricing deals negotiated by President Donald Trump with pharmaceutical companies.
The group recently confirmed that its more than 9,000 pharmacies now accept discount cards from the TrumpRx platform for eligible patients.
Management said the lower prices create a new baseline from which Caremark can negotiate further savings, rather than disrupting existing relationships with drugmakers.
The company added that its guidance reflects the cumulative impact of these pricing changes alongside broader policy adjustments affecting insurance and pharmacy reimbursement.
Insurance and primary care progress
The insurance segment, which includes Aetna, generated $36.29 billion in revenue during the quarter, up more than 10% from a year earlier.
Management said performance was driven by continued improvement in Medicare Advantage, as margins move back towards long-term targets.
Medical costs remain elevated as patients resume procedures delayed during the pandemic, but the medical benefit ratio held steady at 94.8%.
CVS said Medicaid pass-through payments late in December supported the ratio, while changes under the Inflation Reduction Act altered the usual timing of Medicare drug costs.
The company has begun discussions with the Centers for Medicare and Medicaid Services ahead of finalised payment rates expected in April.
Primary-care arm Oak Street Health also showed signs of improvement after CVS closed 16 underperforming locations, with profitability expected to strengthen this year.
Pharmacy and health services lift sales
The pharmacy and consumer wellness division posted $37.66 billion in fourth-quarter revenue, up 12.4% year on year.
CVS said higher prescription volumes, including scripts acquired following Rite Aid’s bankruptcy, helped drive growth, though this was partly offset by reimbursement pressure and the entry of new generic drugs.
The health services segment delivered $51.24 billion in revenue, up 9%, supported by Caremark’s role in negotiating drug discounts, managing formularies, and reimbursing pharmacies.
Together, the results point to steadier operating performance as CVS works through structural changes across its businesses.
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