CVS Health Earnings Smash Forecasts. A Value Play Has Become a Rally.

CVS Health posted better-than-expected earnings and revenue in the second quarter. (Brandon Bell/Getty Images)

CVS Health posted earnings on Thursday that smashed Wall Street expectations and kept the good-news story rolling.

The owner of the sprawling drugstore chain and the insurance giant Aetna turned in standout second-quarter results that appear to have been the best among its peers.

After years of underperformance, CVS has had the best 2025 of any healthcare stock in the S&P 500, up 38.8% as of the close of trading on Wednesday. What started as a value play has evolved into a legitimate rally, and the company reported earnings beats in February and May.

CVS did it again Thursday morning. The company posted second-quarter results that blew past consensus estimates, and raised its full-year guidance. Adjusted earnings of $1.81 per share beat the FactSet consensus estimate of $1.46 per share, while revenue of $98.8 billion topped calls for $94.5 billion.

The insurance division’s medical cost ratio—a metric that tracks the proportion of premiums paid out to cover medical expenses—was 89.9%, better than the 90.5% estimate.

The company raised its full-year guidance, saying it now expects adjusted earnings in the range of between $6.30 and $6.40 per share in 2025, up from its prior guidance of between $6 and $6.20. Analysts polled by FactSet were expecting $6.12 a share.

The results come amid a rocky earnings season for most of its peers. UnitedHealth Group shares fell 7.5% on Tuesday on weak guidance and an earnings miss, while Elevance Health fell 19.6% over two days in mid-July on a guidance cut. Early in the month, Centene shares dropped 40.4% in a single day after it pulled its full-year guidance.

“CVS had one of the cleanest prints we have seen so far this earnings season,” Evercore ISI analyst Elizabeth Anderson wrote early Thursday.

Shares rose following the earnings report, but reversed course in afternoon trading Thursday, falling 1.2% to $61.62. Peer stocks traded mixed. UnitedHealth and Elevance were down 5.1% and 2.5%, respectively, while Centene rose 1.9%.

Revenue for each of the company’s three divisions beat estimates. The healthcare benefits division, which includes Aetna, had revenue of $36.3 billion, beating the FactSet consensus estimate of $34.8 billion. Its health services division, which includes its pharmacy benefit manager CVS Caremark, had revenue of $46.5 billion, beating the $43.8 billion consensus estimate. While its pharmacy division had revenue of $33.6 billion, beating the $31.9 billion consensus estimate.

Adjusted operating income for the healthcare benefits division and the pharmacy division also beat estimates, while the health services division slightly missed. For the whole enterprise, adjusted operating income was $3.8 billion for the quarter—up from $3.7 billion in the same quarter last year and well ahead of the $3.2 billion consensus estimate.

On an investor call early Thursday, executives said the company had been focused on fixing its Aetna business, which struggled to adapt as patients sought more medical care after the Covid-19 pandemic.

“We’re focused on returning Aetna to its target margins and, frankly, a leadership position in the industry,” Aetna’s President Steve Nelson said on the call.

CVS shares fell 57% from the start of 2022 through the end of 2024 as CVS’s retail pharmacy struggled with a troubled business model, its pharmacy benefit manager faced increasing government scrutiny, and its insurer stumbled amid industrywide challenges to the Medicare Advantage business.

In late 2024, the company elevated a top executive, David Joyner, to replace Karen Lynch as CEO, and investors developed a newfound interest in the stock.

Corrections & Amplifications: CVS Health is expected to report full-year 2025 earnings of $6.12 a share, according to FactSet. An earlier version of this article reported an incorrect figure.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com and Mackenzie Tatananni at mackenzie.tatananni@barrons.com