CVS Health Earnings: Turnaround Efforts Proceeding and Could Continue Boosting Profits in 2026

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

CVS Health’s CVS third-quarter results included 8% revenue growth and 47% adjusted EPS growth, as margins improved at its medical insurer from a very weak 2024. Those results led to a third consecutive guidance increase for 2025, and management gave an initial outlook for mid-teens adjusted EPS growth in 2026.

Why it matters: Shares rallied about 2% in pre-market trading on this news, building on a stellar year for CVS shareholders, reflecting that the turnaround at the firm continues and its strong profit growth may have legs through 2026.

• From an operational perspective, we appreciate the positive steps being made at CVS’ medical insurer, Aetna. Specifically, the medical cost ratio improved about 240 basis points year over year, which was a nice trend relative to key peers, albeit from a very weak base in 2024.
• Management also increased its 2025 outlook, including adjusted EPS of $6.55-$6.65, up from $6.30-$6.40, and gave an initial outlook for mid-teens EPS growth in 2026, although off a $0.45 lower base than 2025 guidance related to risk-related net benefits that will not repeat in 2026.

The bottom line: After adjusting our near-term expectations to reflect ongoing trends and management’s initial 2026 outlook, we are maintaining our $92 fair value estimate on CVS and still view shares as about fairly valued when considering the high uncertainty around future cash flows.

• Our High Uncertainty Rating reflects potential regulatory pressures that could constrain intermediate-term profits due to potential declines in Medicaid and the individual exchanges, rising scrutiny in Medicare Advantage, and further PBM regulation.
• Also, last 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.