CVS Health Earnings: Turnaround Efforts and Individual Plan Benefits Boost 2025 Outlook

Key Morningstar Metrics for CVS Health

• Fair Value Estimate: $92.00
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: High

What We Thought of CVS Health’s Earnings

In the second quarter, CVS Health CVS turned in 8% revenue growth, 2% adjusted operating profit growth, and roughly flat adjusted earnings per share of $1.81. Management increased its 2025 adjusted EPS outlook to $6.30-$6.40 from $6.00-$6.20 and its operating cash flow estimate by 7%.

Why it matters: The shares rose about 6% in July 31 pre-market trading on this news. This sets CVS apart from some of its managed care peers that reported weak results that cut into 2025 guidance, including Centene, Elevance, and UnitedHealth.

• In medical insurance, adjusted operating profit grew 39%, reflecting a low Medicare Advantage base last year and a shift in individual risk-related payments. While most of its peers suffered from this shift in individual payments, CVS benefited, which helped boost 2025 guidance.
• In its noninsurance businesses, the retail pharmacy segment turned in 8% adjusted operating profit growth, while the health services segment declined 18% on weakness in the company’s value-based care operations and ongoing pressures in its pharmacy benefit manager.

The bottom line: To reflect improving near-term prospects and cash flows generated since our last valuation change, we are boosting our fair value estimate for CVS to $92 per share from $86. The shares appear moderately undervalued, with significant upside potential on turnaround efforts.

• In the spring, we downgraded our moat rating for CVS to none from narrow, reflecting weak economic profits expected for the foreseeable future, even when considering ongoing efforts to improve margins.
• Given regulatory pressures that could constrain intermediate-term profits due to potential declines in Medicaid and the individual exchanges, rising scrutiny in Medicare Advantage, and potential regulation of the PBMs, we continue to see high uncertainty around future cash flows.