CVS Trims Underperforming Assets, Boosts Earnings Guidance

CVS Health Corp. (CVS) reported third-quarter 2025 results that exceeded analyst expectations, driven by strong performance in its insurance and pharmacy segments, and raised its full-year earnings guidance for the third consecutive quarter. The healthcare giant posted non-GAAP earnings per share (EPS) of $1.60, surpassing forecasts by $0.24, while revenue surged 7.8% year-over-year to $102.9 billion, outpacing estimates by $4.07 billion, according to GuruFocus. The company also revised its 2025 adjusted EPS outlook to a range of $6.55 to $6.65, up from $6.30 to $6.40, and projected cash flow from operations of $7.5 billion to $8 billion, as reported by Seeking Alpha.

The improved results were attributed to a turnaround in CVS's Aetna insurance unit, which saw a decline in its medical benefit ratio to 92.8% from 95.2% in the prior year, reflecting better cost management and favorable premium reserves, Seeking Alpha reported. CEO David Joyner highlighted the "multiyear Aetna recovery" as a key driver, noting that the unit's performance has stabilized after a leadership overhaul last year, Bloomberg reported. Additionally, the acquisition of Rite Aid's pharmacies in 2024 contributed to a 11.7% revenue increase in the pharmacy segment, driven by higher prescription volumes and an expanded customer base, according to Finimize.

However, the company recorded a $5.7 billion goodwill impairment charge related to its Oak Street Health primary care clinics, which it plans to scale back. Joyner stated that 16 clinics will close by February 2026, and no new clinics will open in 2026, as the unit underperformed expectations, Bloomberg reported. Despite this, CVS reported year-to-date cash flow from operations of $7.2 billion, reinforcing its financial resilience, according to GuruFocus.

The stock initially dipped 1.5% premarket after the earnings release, though the long-term outlook remains positive. Analysts have upgraded their ratings, with a consensus "Outperform" label, and the company's shares have risen nearly 30% since Joyner's appointment as CEO in 2024, Bloomberg reported. The revised guidance and operational efficiencies have also boosted investor confidence, with the price-to-earnings ratio climbing to 12 from 11 last quarter, Finimize noted.

CVS's performance underscores its strategic shift toward high-margin insurance and pharmacy services while pruning underperforming assets. With a focus on cost control and integration of Rite Aid's operations, the company aims to solidify its position as a leader in the evolving healthcare landscape.