CVS Health Posts Strong Q3 Earnings: How to Play the Stock Now?

CVS Health CVS continues to enjoy the strength of its diversified businesses. Third-quarter 2025 revenues hit a record $103 billion, up 8% year over year, with all segments contributing to growth. The bottom line was also a highlight, as adjusted earnings per share (EPS) surged nearly 47% to $1.60. Both metrics beat consensus estimates for the third consecutive quarter. CEO David Joyner noted about the company’s year-long intense focus on meeting commitments to customers, partners, colleagues and shareholders, along with growing optimism about the opportunities ahead.CVS Health also shared its revised outlook for the full-year 2025. Adjusted EPS is expected in the range of $6.55-$6.65 (previously $6.30-$6.40), while revenues are anticipated to be at least $397 billion compared to the earlier projection of at least $391.5 billion.So far this year, shares of CVS Health have surged 73.3%, outpacing the industry, the broader Medical sector and the S&P 500 composite. The stock has also climbed above its peers, UnitedHealth Group UNH and Humana HUM, which have dropped 36.4% and 4.5%, respectively.CVS Health’s YTD PerformanceImage Source: Zacks Investment ResearchTechnical Indicator for CVSBased on the Nov. 14 closing price, CVS stock is trading above its 90-day and 200-day moving averages, signaling a sustained bullish trend.Image Source: Zacks Investment ResearchCVS’ Progress in Aetna TransformationCVS Health is focused on returning the Aetna business to its target margins of 3%-5% and regaining its leadership position after a mix of both macro and company-specific challenges led to its underperformance last year. The company’s strong execution at Aetna continues to drive results, having realigned the organization, strengthened its talent with a clear focus on creating distinction in the marketplace, and enhanced operations using technology to automate and streamline processes. Aetna also maintains one of the shortest prior authorization lists, with more than 95% of the eligible requests approved within 24 hours.Further, Aetna earned a top spot in CMS’ 2026 Medicare Advantage Stars Ratings. Based on the current membership, more than 81% of its Medicare Advantage members are expected to be in plans rated 4 stars or higher, with more than 63% in 4.5-star plans — almost twice the industry average. According to CVS, the result reflects its ability to collaborate across the enterprise to deliver enhanced quality and service, lower costs and remove friction from the health care system.CVS’ Health Care Delivery on Path for Financial ImprovementWithin the company’s Health Services segment, the Health Care Delivery business posted roughly 25% year-over-year growth, mainly driven by rising patient base at Oak Street and higher volumes at Signify Health. The performance excludes the effect of CVS’ exit from the Accountable Care business earlier in the year.CVS Health also made certain strategic changes during the quarter, including scaling back planned Oak Street clinic openings starting in 2026 and beyond. Following a comprehensive assessment, the company decided to close underperforming clinics that are not positioned to achieve sustainable margins. These actions required a review of goodwill within the Health Care Delivery reporting unit, leading to the recording of a nearly $5.7 billion impairment charge. CVS maintains that value-based care remains central to its Medicare strategy and anticipates that these steps will help improve financial performance beginning in 2026.Momentum in CVS’ Pharmacy & Consumer WellnessThe Pharmacy & Consumer Wellness segment generated more than $36 billion in third-quarter revenues, driven by pharmacy drug mix and increased prescription volume. CVS Pharmacy completed the acquisition of prescription files of 626 former Rite Aid and Bartell Drugs pharmacies across 15 states, and also certain stores in Idaho, Oregon and Washington for a total consideration of $465 million. Retail pharmacy script share grew to approximately 28.9% in the quarter.In addition, the company has transitioned all its commercial and third-party discount card programs into the CostVantage pharmacy reimbursement model. CVS is also making steady progress in shifting its Medicare business to cost-based pricing models across the full line of business.CVS’ Valuation MetricsBased on the forward 12-month price/earnings (P/E) ratio, CVS Health trades at 10.95, slightly above its median but lower than the 16.10 industry average. In contrast, UnitedHealth Group currently has a 12-month P/E of 18.43, while Humana has 17.93.CVS Health One Year P/EImage Source: Zacks Investment ResearchWhat Concerns CVS Health?For the rest of 2025, CVS is maintaining a cautious outlook as cost trends remain elevated and broader macro headwinds could emerge. In the Pharmacy and Consumer Wellness segment, the company is monitoring for signs of a potential slowdown in the consumer environment, the effects of tariffs and shifting vaccine sentiment that may influence market demand. The Medicaid business continues to face medical cost pressures, largely tied to higher-than-expected acuity following the resumption of member redeterminations. Additionally, CVS Health’s planned exit from the states where Aetna operates individual public health insurance exchanges in 2026 may cause medical membership disruptions and weigh on its financial results.Our Take on CVS StockCVS Health delivered another quarter of disciplined execution, led by continued traction in Aetna’s turnaround and improving trends in Health Care Delivery. Management’s upward revision to full-year guidance reflects solid momentum in Pharmacy & Consumer Wellness. The Zacks Rank #3 (Hold) stock has also outpaced the industry, sector and peers so far this year. Given its cheaper valuation, CVS appears to be a good option to retain in the portfolio.New investors may want to wait until the company gains greater visibility into its current operational challenges.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Radical New Technology Could Hand Investors Huge GainsQuantum Computing is the next technological revolution, and it could be even more advanced than AI.While some believed the technology was years away, it is already present and moving fast. Large hyperscalers, such as Microsoft, Google, Amazon, Oracle, and even Meta and Tesla, are scrambling to integrate quantum computing into their infrastructure.Senior Stock Strategist Kevin Cook reveals 7 carefully selected stocks poised to dominate the quantum computing landscape in his report, Beyond AI: The Quantum Leap in Computing Power.Kevin was among the early experts who recognized NVIDIA's enormous potential back in 2016. Now, he has keyed in on what could be "the next big thing" in quantum computing supremacy. Today, you have a rare chance to position your portfolio at the forefront of this opportunity.See Top Quantum Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report UnitedHealth Group Incorporated (UNH): Free Stock Analysis Report Humana Inc. (HUM): Free Stock Analysis Report CVS Health Corporation (CVS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks