CVS Health raises annual profit forecast as turnaround gathers steam

By Manas Mishra

(Reuters) -CVS Health raised its full-year profit forecast on Thursday following strong performance across its businesses, signaling that the healthcare conglomerate was on a path to recovery after a series of challenges last year.

Shares of the company jumped 8.5% to $72.35 in premarket trading after CVS raised its 2025 adjusted profit forecast to $6 to $6.20 per share from $5.75 to $6 previously. 

The shares fell over 40% last year due to weak performance in the company’s insurance and pharmacy businesses and multiple cuts to its profit outlook, but have pared most of those losses this year following a better-than-expected earnings report in February. 

CEO David Joyner, who took the helm in October, has laid out cost-cutting plans and reshuffled the top management to help the company navigate one of the most challenging periods in its six-decade history.

CVS Health (NYSE:CVS) on Thursday reported its first-quarter adjusted profit above estimates, helped by lower-than-expected medical costs, a likely relief for investors after industry bellwether UnitedHealth (NYSE:UNH) cut its forecast last month, citing elevated costs. 

Revenue from CVS’ pharmacy unit of $31.91 billion beat estimates of $30.96 billion. Its health services unit brought in revenue of $43.46 billion, also above estimates of $43.30 billion. 

"Overall, this will be viewed as a strong start to 2025, providing confidence that the management team has a good grasp on all of CVS’s many underlying businesses," said Evercore ISI analyst Elizabeth Anderson.

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CVS said it would exit the individual exchange business, where it sells plans directly to individuals through Obamacare exchanges -- its latest effort to streamline operations. 

Separately, its pharmacy benefit management unit plans to drop Eli Lilly (NYSE:LLY)’s weight-loss drug Zepbound as a preferred product from its reimbursement list from July 1, and retain rival Wegovy, in a win for the Novo Nordisk (NYSE:NVO) drug.

Health insurers have been facing increased medical costs for the past two years, driven by high healthcare demand among older adults enrolled in Medicare Advantage plans. 

However, CVS’ medical loss ratio, or the percent of premiums spent on patient care, fell to 87.3% in the first quarter ended March 31 from 90.4% a year ago, below analysts’ expectations of 88.9%, according to estimates compiled by LSEG. 

The company earned $2.25 per share, compared with analysts’ average estimate of $1.70. 

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