CVS Health Delivers Strong Q4 Results, Stock Breaks Key Resistance

CVS Health (CVS) reported stronger-than-expected fourth-quarter earnings, sending its stock higher by 4% as it broke a key downward trendline from late October and surged above its 200-day moving average. The stock has been on a remarkable run in 2025, rallying 30% as the company’s turnaround efforts gain traction. Investors are encouraged by the improving fundamentals under new CEO David Joyner, though the stock’s Relative Strength Index (RSI) above 70 suggests it may be overbought in the near term.

Q4 Earnings Beat Expectations

CVS posted adjusted earnings per share (EPS) of $1.19, well above analyst estimates of $0.92. Revenue came in at $97.7 billion, exceeding the $96.88 billion consensus forecast and marking a 4.2% increase year-over-year. The company’s three major business segments—Health Care Benefits, Health Services, and Pharmacy & Consumer Wellness—all delivered revenue that topped expectations.

Key figures from the quarter:

- Revenue: $97.7 billion (+4.2% YoY) vs. $96.88 billion expected

- Adjusted EPS: $1.19 vs. $0.92 expected

- Comparable sales: +10.2% vs. +7.71% estimated

- Healthcare Benefits revenue: $32.96 billion vs. $32.61 billion expected

- Health Services revenue: $47.02 billion vs. $44.56 billion expected

- Pharmacy & Consumer Wellness revenue: $33.51 billion vs. $31.21 billion expected

While overall results were strong, the company continued to face pressure in its insurance business, which posted higher medical costs, contributing to an adjusted operating loss of $439 million. However, CVS's pharmacy and consumer wellness segment, which includes its more than 9,000 retail pharmacies, saw solid growth, helping offset these challenges.

A Look at Segment Performance

Health Care Benefits Segment

CVS's insurance business, primarily through Aetna, generated $32.96 billion in revenue, up 23% year-over-year. However, rising medical costs weighed on profitability. The medical cost ratio (MCR), which measures total medical expenses relative to premiums collected, climbed to 94.8% from 88.5% a year earlier. The increase in MCR was attributed to higher utilization rates as more Medicare Advantage patients returned for procedures postponed during the pandemic.

Despite this, CVS forecasted an improvement in 2025, guiding the MCR to 91.5% at the low end, suggesting management expects stabilization in medical costs.

Health Services Segment

The health services unit, which includes the Caremark pharmacy benefits manager (PBM), saw revenue of $47.02 billion, exceeding analyst estimates. However, the unit faced headwinds due to the loss of a large client and continued pricing pressure in its PBM operations. CVS processed 499.4 million pharmacy claims in the quarter, slightly ahead of the 497.73 million expected.

Pharmacy & Consumer Wellness Segment

The pharmacy business, which includes both retail pharmacy sales and wellness services like vaccinations, posted $33.51 billion in revenue, a 7.5% increase year-over-year. Growth was driven by increased prescription volume and favorable drug mix, though ongoing reimbursement pressures remain a challenge. Same-store prescription volume increased 5.9% on a 30-day equivalent basis.

Full-Year Guidance and Market Reaction

Looking ahead, CVS provided full-year 2025 guidance that was in line with expectations:

- Adjusted EPS: $5.75 to $6.00 (vs. consensus of $5.97)

- Cash flow from operations: Approximately $6.5 billion

- Healthcare Benefits revenue: At least $132.1 billion

Despite higher-than-expected medical costs in Q4, CVS expects stability in 2025 as cost pressures ease and recent operational improvements take hold.

Stock Surges, Testing Key Resistance

Following the earnings release, CVS stock jumped 4%, breaking a downward trendline dating back to late October and reclaiming its 200-day moving average, a key technical level. The stock has already rallied 35% in 2025, reflecting improving investor confidence in the turnaround story.

However, with an RSI of 75, the stock may be nearing overbought territory, raising the question of whether it is due for a pullback in the near term. Analysts will be watching whether CVS can maintain this momentum and continue executing its cost-cutting and growth strategies.

Conclusion: A Promising but Challenging Road Ahead

CVS's Q4 results underscore signs of progress in its turnaround, with strong earnings, a rebound in pharmacy revenue, and promising full-year guidance. The insurance segment remains a challenge, but management's focus on improving cost structures and growing key areas like specialty pharmacy and consumer wellness is resonating with investors.

With the stock breaking out of a prolonged downtrend, momentum is on CVS's side—but with shares up 35% year-to-date, some caution may be warranted in the near term. Investors will closely monitor execution in 2025 to see if the company can sustain this progress.