Buoyed by a rebound in its Aetna business and strong growth in its Caremark pharmacy benefit management segment, CVS Health is forecasting double-digit earnings growth in 2026, executives told investors and analysts Wednesday.
Brian Newman, executive vice president and chief financial officer, said the healthcare giant expects mid-teens percentage growth for adjusted earnings per share next year.
“We are encouraged by the year-to-date performance of our diversified enterprise and are confident we are taking the right steps to position us for both near and long-term success,” Newman said during CVS Health’s third-quarter earnings call.
CVS Health reported 7.8% revenue growth in the third quarter, pulling in a "record high" of $102.9 billion, handily beating Wall Street estimates.
The company reported improvements in its Aetna insurance unit and "another strong selling season" for its pharmacy benefit management business, Caremark.
CVS Health reported adjusted operating income of $3.5 billion and adjusted earnings per share of $1.60, up from $1.09 in the prior year, primarily due to improved adjusted operating income in the healthcare benefits segment, the company said.
The company generated year-to-date cash flow from operations of $7.2 billion.
The third-quarter results exceeded Wall Street expectations. The average estimate of 10 analysts surveyed by Zacks Investment Research was for earnings of $1.36 per share. Revenue also beat the Street as analysts expected $98.29 billion in third-quarter revenue.
CVS Health raised its adjusted earnings per share guidance range for full-year 2025 to between $6.55 and $6.65 from $6.30 to $6.40. It also updated its cash flow from operations guidance to a range of $7.5 billion to $8 billion from at least $7.5 billion.
The company also updated its GAAP diluted earnings per share guidance range to a loss of between 34 cents and a loss of 24 cents per share from $3.84 to $3.94 per share.
CVS now expects 2025 revenue to reach $397 billion, up $6 billion from its previous revenue guidance of $391 billion for full-year 2025.
The company's full-year 2025 guidance updates reflect third-quarter performance in the healthcare benefits and pharmacy and consumer wellness segments, partially offset by a decrease in the health services segment, management said.
“While we are encouraged by our progress, we maintain a disciplined and cautious outlook as we position our business for another year of strong performance in 2026,” David Joyner, CVS Health president and CEO, said during the third-quarter earnings call Wednesday. "This transformation is clearly visible within our Aetna business, for after a challenging 2024 there is renewed vigor and optimism about the future.”
The company healthcare benefits segment, which includes its Aetna insurance business, reported a 9.1% jump in revenue in the third quarter to nearly $36 billion. This growth was primarily driven by increases in the government business, largely due to the impact of the Inflation Reduction Act (IRA) on the Medicare Part D program, the company said.
That segment had adjusted operating income of $314 million compared to an adjusted operating loss of $924 million in the prior year. "The change was primarily driven by the favorable year-over-year impact of premium deficiency reserves, higher favorable prior period development and improved underlying performance in the government business," executives said in the press release. "These increases were partially offset by changes in the seasonality of the Medicare Part D program due to the impact of the IRA and the impact of higher acuity in the individual exchange product line."
Aetna's medical benefit ratio decreased to 92.8% in the third quarter compared to 95.2% in the prior year.
“Aetna is, once again, the industry leader amongst national payers for 2026 Medicare Advantage stars ratings, even with CMS recently announcing the cut points for stars continue to become more challenging,” said Joyner, who took the helm at CVS Health a year ago to help turn around the business.
More than 81% of Aetna Medicare Advantage (MA) members are in 2026 MA Prescription Drug plans that are rated four stars or higher by the Centers for Medicare & Medicaid Services, Joyner noted, while more than 63% of Aetna MA members are in a 4.5-star plan for 2026.
“This result is not just a point of pride, but another proof point that our ability to effectively collaborate across the enterprise allows us to deliver exceptional quality and service, drive down the cost of care and remove friction from the healthcare system.”
Medical membership as of Sept. 30 was 26.7 million members, relatively flat compared to the second quarter and down 445,000 members compared to the same quarter a year ago.
“This year-over-year decrease is primarily driven by declines in our individual exchange and Medicare product lines partially offset by growth in our commercial fee-based membership,” Newman said.
The company boosted its adjusted earnings guidance despite logging a hefty $5.7 billion impairment charge in the third quarter that dragged its bottom line to a loss of $3.99 billion. Diluted loss per share was $3.13, as opposed to diluted earnings per share of 7 cents recorded in the third quarter of 2024. CVS Health reported an operating loss of $3.2 billion in the third quarter as opposed to an operating gain of $832 million during the same quarter in 2024. Generated year-to-date cash flow from operations stood at $7.2 billion.
The company reported that its PBM business Caremark closed out a strong selling season "with contract wins totaling nearly $6 billion and retention in the high nineties, highlighting commitment to providing exceptional value and transparency."
CVS’ health services segment includes Caremark and the Oak Street Health clinics as well as provider enablement solutions. Revenues in that segment grew 11.6% to reach $49 billion, primarily driven by pharmacy drug mix and brand inflation, partially offset by continued pharmacy client price improvements.
Adjusted operating income decreased by 7% in the third quarter.
CVS Health is facing headwinds in its Oak Street Health primary care business. The company plans to close 16 of its Oak Street Health clinics amid rising cost pressures, Supermarket News reported Monday.
CVS acquired Oak Street Health in a $10.6 billion deal in 2023 and has since expanded it from 169 to about 230 locations. At the time of the acquisition, CVS leadership said they hoped to expand the Oak Street Health network to 300 locations by 2026.
“We made the difficult decision to close underperforming clinics where we do not see a reasonable path to sustainable margins,” Newman told investors on the call.
The $5.7 billion goodwill impairment charge in the third quarter was related to the company's healthcare delivery reporting unit.
“Our decision during the quarter to temper Oak Street Health clinic growth over the next few years was the primary reason for reporting this charge,” Joyner said. “Despite this update, value-based care remains a critical component of our strategy. The reasons to believe in this business have not changed, but the marketplace is evolving, and we are adapting our strategy to get financial performance back in line with our expectations.”
He added, “We understand the challenges at Oak Street Health and have taken actions to improve performance of both the near and long term. We continue to strengthen our healthcare delivery business through investments in technology, a new leadership team and fair and equitable contracts with our payer clients.”
For its Caremark PBM business, CVS Health leaders expect modestly lower growth as the company continues to transition its contracts toward drug-level pricing over the next few years.
Nearly two years ago, the healthcare giant revealed that it was overhauling its commercial drug reimbursement model. The company rolled out two models: CostVantage for retail pharmacies and TrueCost for PBM clients. TrueCost offers pricing that reflects the true net cost of prescription drugs, with visibility into administrative fees, executives said at the time.
Caremark’s TrueCost model “guarantees a net cost of each individual drug, driving drug pricing transparency for our clients and members,” according to Newman.
Joyner noted there are “market dynamics” that will impact CVS Caremark’s near-term growth rate as it transitions to this model. But Joyner emphasized that TrueCost was the “pricing model of the future.”
“From our perspective, what we're doing with TrueCost, which we launched two years ago, was very deliberate, and it was driving greater transparency and making sure that consumers and clients had the benefit of that transparency, while again maintaining our ability to create the competition and lower the net cost of drugs,” Prem Shah, executive vice president and group president at CVS Health, told investors on the call.
“I think the near-term headwinds is not an implication on the long-term viability of the PBM model,” Joyner noted. “I am incredibly bullish about the road ahead, and believe we will continue to lead this industry, given our unique advantages and insights.”
In its pharmacy and consumer wellness segment, CVS Health reported total revenues increased 11.7% to $26 billion primarily driven by pharmacy drug mix and increased prescription volume, including incremental volume resulting from the company's Rite Aid prescription file acquisitions, partially offset by continued pharmacy reimbursement pressure.
Within that segment, adjusted operating income decreased 7.4% in the third quarter.
“Our 9,000 pharmacies are the front door to our enterprise. They are a differentiator for our business and a force multiplier towards improving the health of the communities that we serve,” Joyner said on the call. “The strength of our diversified businesses will continue to set us apart, enabling us to deliver strong results, even in this dynamic environment.”
Editor's note: This story was updated following CVS Health's earnings call Wednesday morning.