CVS Health (CVS) experienced a significant surge in its stock price on February 12, 2025, with shares rising over 9% in premarket trading and over 14% shortly after the market opened.
This impressive market reaction followed the release of the company’s fourth-quarter results, which exceeded analysts’ expectations. The positive earnings report made CVS a top performer in the S&P 500 index and pushed its stock past the 200-day moving average.
Key Financial Highlights
CVS Health reported adjusted earnings per share (EPS) of $1.19 on revenue of $97.71 billion, surpassing analysts’ estimates of $0.91 EPS on $96.89 billion revenue.
While the adjusted EPS was lower than the $2.12 reported in the same quarter the previous year, the margin by which it beat expectations was the widest since the second quarter of 2020. The company’s revenue also saw a 4.2% increase compared to the previous year, driven by growth in both its pharmacy and insurance sectors.
| Metric | Q4 2024 (Adjusted) | Q4 2023 (Adjusted) |
|---|---|---|
| Earnings Per Share (EPS) | $1.19 | $2.12 |
| Revenue | $97.71 billion | $93.81 billion |
Segment Performance
All three of CVS’s business segments outperformed Wall Street expectations for the fourth quarter.
- Health Care Benefits: Revenues grew by 23.3% to $32.96 billion. However, the segment reported an adjusted loss of $439 million, a significant contrast to the $676 million operating income during the same period last year, primarily due to increased medical costs and the impact of Medicare Advantage star ratings.
- Pharmacy & Consumer Wellness: Revenues increased by 7.5% to $33.51 billion, driven by an uptick in prescription drug volumes.
- Health Services: Revenues decreased slightly by 4.3% to $47.02 billion.
Factors Influencing the Surge
Several factors contributed to the positive market response:
- Improved PBM Performance: Positive performance in the pharmacy-benefit-manager (PBM) business helped alleviate concerns. Caremark, CVS’s pharmacy benefit manager, saw revenues of $47 billion.
- Strong Pharmacy and Consumer Wellness Division: Revenue from this division climbed 7.5% to $33.51 billion, boosted by higher prescription drug volumes.
- Slowing Medical Cost Increases: The company reported a smaller-than-expected drop in fourth-quarter profit as the pace of medical cost increases slowed.
Challenges and Future Outlook
Despite the positive results, CVS Health faces ongoing challenges:
- Elevated Medical Expenses: The insurance division has been grappling with increased medical expenses. Health care costs increased 32.1% to $29.54 billion. The medical benefit ratio for the insurance unit climbed to 94.8%.
- Medicare Advantage Star Ratings: A decline in the Medicare Advantage star ratings adversely affected the health care benefits segment’s operating results.
- Leadership Transition and Cost-Cutting Measures: The quarter marked the first full reporting period under CEO David Joyner, who is implementing a turnaround strategy that includes $2 billion in cost reductions over the next few years.
Looking ahead, CVS Health projects full-year 2025 adjusted earnings to be in the range of $5.75 to $6.00 per share.
CVS Health’s stock surge reflects investor confidence in the company’s ability to navigate challenges and capitalize on growth opportunities.
While concerns remain regarding medical costs and the performance of the insurance division, the company’s strong fourth-quarter results and strategic initiatives under new leadership have instilled optimism in the market.
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