CVS Health’s stock has surged over 45% this year, outperforming rivals Walgreens and UnitedHealth Group. The company’s shares plummeted last year due to higher-than-expected medical costs in its insurance unit, but analysts are now optimistic about its ability to navigate the challenge moving forward.
The upbeat quarterly results may signal brighter days ahead for CVS, with investors convinced that the company is starting to turn itself around. Analysts such as Michael Cherny and Brian Tanquilut have upgraded the stock, citing improved performance in the insurance unit and cost-cutting measures.
CVS has taken steps to right-size its Medicare Advantage plans for 2025, including increasing copays and premiums, which will help reduce expenses tied to those benefits. This move is expected to drive away patients who need or want to use certain health benefits, a strategy used by other insurers such as Humana.
The company’s unique position in the market, owning both an insurer and a retail pharmacy chain, has contributed to its outperformance. Caremark, CVS’s pharmacy benefit manager, sits at the intersection of the company’s retail pharmacy operation and Aetna insurer, boosting competitive advantage and driving prescription sales to CVS pharmacies.
Analysts predict that higher medical costs will be baked into CVS’s full-year guidance this year, but they also expect the company to maintain its momentum. With a robust business model and cost-cutting measures in place, CVS is now reaching a point where “all three of its business segments are clicking,” according to Tanquilut.
As the industry navigates higher medical costs, CVS is well-positioned to take advantage of its diversified business model and unique position in the market. With its shares outperforming rivals, investors may be looking to add CVS to their portfolios as a potential long-term growth opportunity.
Source: https://www.cnbc.com/2025/02/13/cvs-health-may-be-on-track-to-turn-its-struggling-business-around-.html