CVS Health reported stronger-than-expected first-quarter earnings and revenue, with improvements in its insurance division driving optimism and prompting an upward revision of full-year adjusted earnings guidance to between $6.00 and $6.20 per share. However, the company lowered its GAAP earnings guidance due to a legal charge linked to its Omnicare subsidiary, which was found liable for dispensing medications without valid prescriptions. CVS has announced plans to appeal the verdict.
Although no revenue forecast was issued for the full year, CVS stated it remains cautious amid persistent elevated medical costs and potential economic challenges. The company had anticipated these trends and made strategic decisions about which markets to focus on within its insurance unit.
For the first quarter, CVS reported adjusted earnings per share of $2.25, beating analyst expectations of $1.70. Revenue reached $94.59 billion, surpassing projections of $93.64 billion. Net income rose to $1.78 billion, or $1.41 per share, compared to $1.12 billion, or $0.88 per share, a year earlier.
The insurance segment, led by Aetna, showed marked progress after several quarters of pressure from increased medical expenses. The medical benefit ratio improved to 87.3% from 90.4%, indicating more profitability as the company collected more premiums relative to claims paid. Enhanced Medicare Advantage star ratings and better Medicare performance supported this improvement.
Despite the gains, the insurance business absorbed a $431 million premium deficiency reserve charge related to expected losses for the 2025 coverage year, reflecting future liabilities if premiums fall short of covering anticipated claims.
CVS also confirmed it will exit the Affordable Care Act marketplaces under the Aetna brand starting with the 2026 plan year.
In terms of segment performance, the insurance division generated $34.81 billion in revenue, outperforming expectations. However, the retail pharmacy segment, which earned $31.91 billion, missed forecasts, largely due to reduced consumer spending and lower prescription reimbursements.
The health services division, including Caremark, saw revenue increase nearly 8% to $43.46 billion, slightly below projections. Caremark, as a major pharmacy benefit manager, remains a key contributor through drug discount negotiations and formulary management.
CVS continues its broader transformation strategy, including $2 billion in cost reductions and leadership changes aimed at boosting long-term profitability and shareholder value.
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