Shares of CVS Health jumped Thursday after the healthcare giant posted better-than-expected second-quarter results and raised its 2025 forecast.
CVS’ second-quarter performance was encouraging given the headwinds its competitors in the insurance market are facing this year.
It marks the second quarter of growth for CVS after a rocky 2024. In November, CVS did not release formal full-year guidance for 2024 as it felt the sting from elevated utilization. In Medicare Advantage (MA) in particular, Aetna's poor performance in the 2024 star ratings led it to price its slate of plan offerings while underestimating medical costs.
The healthcare giant now projects 2025 adjusted earnings per share of $6.30 to $6.40, up from a prior forecast of $6 to $6.20. The company also raised its cash flow from operations guidance to at least $7.5 billion from approximately $7 billion.
CVS is forecasting full-year revenues of at least $391.5 billion, an increase of approximately $9 billion, driven by increases across all segments, executives said.
The company lifted its guidance based on strength in its pharmacy business and improvements in its insurance unit during the second quarter.
CVS Health's second-quarter total revenues increased to $98.9 billion, up 8.4% compared to the prior year. The company reported net income of $1 billion in the second quarter, or 80 cents a share, down from $1.77 billion, or $1.41 a share, in the same period a year ago. CVS' net income in the quarter was impacted by litigation charges that include penalties against the company's Omnicare business.
The company's adjusted earnings per share of $1.81 were above estimates of $1.46.
The company's healthcare benefits segment reported revenues of $36 billion, up nearly 12% year over year, "primarily driven by increases in the government business, largely due to the impact of the Inflation Reduction Act on the Medicare Part D program," the company said in a press release (PDF).
Adjusted operating income increased 39.4%, primarily driven by the "favorable year-over-year impact of changes to the company’s individual exchange business risk adjustment estimates, improved underlying performance in the government business and higher favorable prior period development," the company said.
The company's medical benefit ratio in its Aetna unit increased to 89.9% in the second quarter from 89.6% in the prior year. For the first six months of 2025, the company's MBR was 88.6%, down from 90% a year ago.
CVS projects its full-year 2025 MBR to be approximately 91%.
Earlier this year, CVS announced Aetna would exit the individual business under the Affordable Care Act's exchanges in 2026 in a move to improve business performance.
CVS Health has 26.7 million members in its Aetna health insurance plans. In the second quarter, medical membership declined by 358,000 members, "reflecting the previously announced membership declines in the individual exchange product line," the company said.
“Our strong results and updated expectations reflect the power of our diversified business. We are seeing the impact of our intense focus on the execution within our Aetna and Pharmacy businesses, while managing incremental pressure in health care delivery. We are encouraged by our enterprise performance and revised outlook, especially in this very dynamic environment. At the same time, we continue to maintain a prudent and respectful outlook for the remainder of the year with clear opportunities for outperformance,” CEO David Joyner said during the company’s second-quarter earnings call Thursday.
“As we focus on delivering against our financial commitments to you, we are also taking on the largest challenges in health care, affordability, access and inconsistent care coordination,” he told investors on the call, noting that CVS has diverse and scaled businesses, a national footprint of pharmacies and connections with more than 185 million consumers.
“Tackling these challenges requires that each of our businesses be best-in-class. I'm pleased to report that we are making meaningful progress in the Aetna business. Our recovery has been a top priority. We realigned the organization and strengthened our talent with a clear focus on creating distinction in the marketplace,” Joyner said.
The company is using technology to enhance operations with a focus on automating and streamlining processes that improve service and reduce friction for members and healthcare professionals, Joyner said. “We're starting to see the results of these efforts, delivering better experiences while also allowing us to better navigate this elevated utilization environment,” he said.
Brian Newman, CVS Health's chief financial officer, told investors that the healthcare benefits business beat revenue expectations by $500 million in the quarter, calling it a “strong performance.”
“The beat itself was primarily driven by Medicare, particularly from individual Medicare, and the two components were Part D and supplementals. And then I would just remind you as we're thinking about the back end of the year, Part D continues to track modestly ahead of expectations, but we're maintaining a cautious outlook until we have more experience given the changes in the planned liability from the IRA,” Newman said during the call.
Steven Nelson, president of Aetna, said the company is focused on returning Aetna to its target margins and “a leadership position in the industry.”
“We’re really encouraged by the strong progress in the quarter and the first half of the year in totality. And while it's early, it's a multiyear journey here and, all respect to the environment that we're in, we're very, very encouraged how the quarter is playing out,” he said.
Aetna's MA plans for 2025 have received strong ratings from the Centers for Medicare & Medicaid Services, which contributed to the year-to-year improvement, Nelson noted.
Aetna’s commercial business also is strong, he said. “We've seen some really nice wins in our self-insured across public and labor, national accounts and our Meritain business. We do see elevated trends. We saw that early. We took a disciplined pricing approach to that in 2025, which has pressured membership, but we're going to stay disciplined in our pricing approach to fully insured,” he said. “But overall, commercial business is strong and it is a platform for innovation. That's resonating really well with our very sophisticated and demanding clients."
Joyner also noted that CVS is driving innovation within its Aetna business. “You've seen this in the work we've done with the prior authorizations with a bundled PA process as well as the new care path and technology that we're rolling out. So I'm really bullish on the progress that Aetna is making,” he told investors on the call.
For the healthcare benefits segment, CVS expects full-year adjusted operating income of approximately $2.42 billion at the low end of its guidance range. This reflects an increase of approximately $500 million, primarily driven by the final 2024 risk adjustment update for its individual exchange business, executives said.
Aetna is well-positioned for future growth, mainly driven by continued margin recovery in MA, noted Michael Cherny, senior research analyst at Leerink Partners, in a research note.
“There are a lot of moving parts across CVS's healthcare enterprise, but we see the totality as moving in the right direction, as a positive sign for this year and subsequent year's performance. The focus remains, at least near-term, on health care benefits. This is the linchpin of CVS's EPS growth and we see a fairly favorable setup heading 2Q, particularly against the backdrop of a conservative FY25 guide,” Cherny wrote.
CVS Health's health services segment, which includes its pharmacy benefit management solutions, reported total revenues increased 10.2% to $46 billion. Second-quarter adjusted operating income decreased 18% year over year, driven by continued pharmacy client price improvements and the impact of a higher MBR within CVS’ healthcare delivery business, specifically Oak Street Health.
CVS is focused on addressing the market dynamics while strengthening the Oak Street Health business and improving the financial performance over the short and long term, executives said.
The company’s PBM business, Caremark, benefited from a strong renewal and sales season, posting solid results. Caremark scored a win when it inked a new pharmacy benefits contract with the California Public Employees’ Retirement System (CalPERS).
Revenue for the pharmacy and consumer wellness segment grew 12.5% to reach $33.5 billion.
CVS Pharmacy plans to acquire the prescription files of certain Rite Aid pharmacies across 15 states in areas that CVS serves, as well as acquire and operate certain Rite Aid stores in Idaho, Oregon and Washington.
CVS Health also has committed $20 billion over the next decade to simplify the U.S. health system for the American consumer. Specifically, the company is committed to advancing interoperability between members, patients/caregivers, healthcare providers and appropriate community resource entities to foster collaboration, improve member outcomes and increase satisfaction, the company said.
Rajiv Leventhal, senior analyst at market research company Emarketer, noted that investors see positive signs as CVS’ health insurance division is finally turning things around.
“CVS’ strong 2025 continues (stock up about 40% year-to-date) after a rough 2024 across the business, which resulted in replacing its CEO. The signs are especially encouraging considering the various headwinds its top competitors are facing. This includes UnitedHealth Group withdrawing its financial guidance earlier this year while also being investigated by the DOJ. Walgreens, meanwhile, is being taken private as a result of its struggling pharmacy and health services businesses. Whether CVS can keep the positive momentum for the rest of its fiscal year will depend on managing costs in the Medicare market, avoiding disruption to its PBM business due to pending lawsuits, and relying less on front-of-store sales,” Leventhal said.
Editor's note: This story has been updated following the company's earnings call.