CVS Health raises 2026 forecast after improving medical cost controls

By Amina Niasse

NEW YORK, May 6 (Reuters) – CVS Health raised its full-year forecast on Wednesday, aided by increased first-quarter earnings in the company’s pharmacy management business and strong medical cost controls in its government-sponsored health plans.

Shares of the healthcare conglomerate rose nearly 6% before the bell.

The company, which also runs a retail pharmacy chain, said its higher forecast reflects lower spending on medical costs in its health insurance business.

“We’re improving our capability of forecasting, so the cost trend did not surprise me,” said Chief Financial Officer Brian Newman in an interview with Reuters.

A more profitable mix of drugs boosted earnings at Caremark, its pharmacy benefit manager, he said.

The company forecast 2026 adjusted profit per share in the range of $7.30 to $7.50, up from a range of $7.00 to $7.20.

Analysts expect full-year earnings per share of $7.16, according to data compiled by LSEG.

CVS reported an adjusted first-quarter profit of $2.57 per share, above analysts’ average estimate of $2.20 per share, according to data compiled by LSEG. 

“Overall a very strong quarter that should continue recent momentum as CVS gets back on the earnings power opportunity track,” said Leerink analyst Michael Cherny.

CONSERVATIVE OPTIMISM

This quarter marks CVS’ fifth consecutive quarterly beat. While the company outperformed Wall Street estimates last year, CVS has taken a conservative approach to its forecasts as it looks to make progress on its turnaround. In 2024, the company had several high-profile quarterly Wall Street misses and replaced its CEO.

CVS’ Aetna insurance business reported a medical loss ratio – or the percentage of premiums spent on medical services – of 84.6%, below analysts’ estimates of 87.58%.

The company reported a medical loss ratio of 87.3% in the prior year.

CVS posted an 11% increase in revenue for its health services segment, which includes its Caremark pharmacy benefit manager, and a 3% increase in revenue for its health benefits business. 

CVS’ Aetna insurance arm focuses on Medicare Advantage, the U.S. government program for adults aged 65 and older and people with disabilities. 

Rivals, including UnitedHealth and Humana, have detailed higher medical costs within the program and a gap between government reimbursement and how much insurers are spending on members’ medical services. 

The U.S. government in April said it would raise 2027 payments to insurers managing Medicare Advantage plans for people aged 65 and older or with disabilities by 2.48% on average. 

Newman said the increase still does not match cost estimates for next year. The company focus on pricing changes or make changes to benefits, he said.

PHARMACY TROUBLES

CVS Health’s pharmacy business grew 5% in 2025, after purchasing pharmacies from former rival Rite Aid, and gained 9 million customers after finalizing its deal. 

Though the company was able to fill more prescriptions and dispense more expensive drugs, operating income for that unit fell 8.8% from last year’s first quarter.

CVS said that unit has become more expensive to operate due to regulatory changes impacting the price of certain drugs, a smaller share of cold and flu illnesses being treated and weather disruptions that slowed operations.

“We had a number of stores that were closed due to snow,” said Newman. CVS is based in Woonsocket, Rhode Island.

Total revenue for the quarter rose to $100.4 billion, beating an expectation of $95.1 billion.

(Reporting by Amina Niasse; editing by Caroline Humer and Lincoln Feast.)