CVS Q2 Estimates Dip: Is the Stock Still a Buy Ahead of Q2 Earnings?

CVS Health Corporation CVS is scheduled to report second-quarter 2025 results on July 31, before the opening bell.In the last reported quarter, the company’s adjusted earnings of $2.25 exceeded the Zacks Consensus Estimate by 31.58%. CVS Health beat estimates in each of the trailing four quarters, the average earnings surprise being 18.08%.CVS Health Corporation Price and EPS Surprise CVS Health Corporation price-eps-surprise | CVS Health Corporation QuoteThe Zacks Consensus Estimate for second-quarter revenues is pegged at $93.72 billion, suggesting growth of 2.7% year over year. The consensus estimate for second-quarter earnings is $1.47 per share, implying a 19.67% decline on a year-over-year basis.Q2 Estimates for CVS Down 11 Cents in 3 MonthsEarnings estimates for CVS Health have dropped from $1.58 per share to $1.47 for the second quarter over the past 90 days.Image Source: Zacks Investment ResearchEstimates have been southbound for this drugstore chain and pharmacy benefits manager over the past three months, influenced by a combination of operational cost pressures, legal headwinds, regulatory challenges and adverse policy developments. Elevated medical costs, particularly in Medicare Advantage, continue to put pressure on CVS Health’s margins, while one-time charges, including $387 million related to the Omnicare verdict, $247 million in ACO asset losses and a $448 million ACA-related reserve further weighed on performance. Additionally, CVS plans to close over 20 pharmacies in Arkansas following the passage of HB1150, a new law banning PBMs from owning pharmacies, intensifying regulatory scrutiny.These closures, combined with broader PBM pressures and CVS Health’s planned 2026 exit from ACA exchanges, might have contributed to analysts revising Q2 earnings estimates downward despite the company raising its full-year outlook.3 Factors to Focus on Ahead of CVS' Q2 EarningsAetna Recovery in Focus Amid Benefit Redesigns and Strategic Pricing: Aetna’s underperformance in 2024 was a key concern, driven by elevated utilization and margin pressure. However, CVS Health has positioned 2025 as a turnaround year for its Healthcare Benefits segment. CVS expects margin recovery in its Healthcare Benefits segment, driven by Medicare benefit redesigns, Medicaid rate adjustments and pricing changes in the ACA market. While membership held steady at about 27.1 million, the shift toward more profitable bronze plans and tighter enrollment control likely improved profitability. A slowdown in inpatient cost growth also points to better medical cost management. These efforts are likely to have supported second-quarter revenues.The Zacks Consensus Estimate for CVS’ Health Care Benefits arm revenues is pegged at $34.6 billion for the second quarter of 2025.PBM Strength and Drug Cost Management: Ahead of CVS Health’s second-quarter results, its pharmacy benefit manager, Caremark, is expected to have played a critical role in mitigating the impact of rising branded drug costs despite intensifying regulatory scrutiny. CVS continues to highlight the value of PBMs, noting nearly $1 billion in savings from biosimilar conversions. Its CostVantage and TrueCost models, now covering over 75% of Caremark’s commercial members, aim to boost pricing transparency and lower costs by tying reimbursements to drug prices and passing rebates directly to patients. These initiatives likely contributed to Caremark’s performance during the second quarter.The Zacks Consensus Estimate for CVS’s Health Services segment revenues stands at $43.52 billion for the second quarter of 2025.Pharmacy & Consumer Wellness: In the to-be-reported quarter, CVS Health’s Pharmacy & Consumer Wellness segment is expected to have benefited from increased prescription volumes and a favorable pharmacy drug mix, helping offset continued reimbursement pressure and soft front store traffic. While the challenging consumer environment and recent generic launches may have weighed on profitability, CVS likely saw support from its completed three-year store closure initiative and progress in footprint optimization, both aimed at boosting efficiency. Additionally, same-store sales and prescription volumes are likely to have remained positive year over year, supporting top-line growth.The Zacks Consensus Estimate for the Pharmacy & Consumer Wellness segment is pegged at $32.16 billion for the second quarter of 2025.CVS Shares Outperform S&P and PeersDuring the second quarter of 2025 (ending June 30, 2025), shares of CVS Health gained 2.5%. The stock has underperformed the S&P 500’s 10.7% rise. The company's peers like Herbalife HLF and UnitedHealth Group UNH registered a respective decline of 2.2% and 40% in their stock prices during this period.Q2 Price Comparison of CVSImage Source: Zacks Investment ResearchValuationFrom a valuation standpoint, CVS Health’s forward 12-month price-to-earnings (P/E) is 9.24X. This is a significant premium to Herbalife, with its current P/E being 4.51X. But it remains undervalued compared to UnitedHealth, whose current P/E is 12.27X.Image Source: Zacks Investment Research Image Source: Zacks Investment ResearchFinal Thoughts on CVSWith solid fundamentals, ongoing turnaround efforts and a strong history of beating earnings estimates, CVS Health, carrying a Zacks Rank #2 (Buy), looks like a smart pick ahead of its second-quarter results. While near-term pressures like high medical costs and regulatory hurdles remain, the company’s actions such as redesigning Aetna benefits, optimizing its retail footprint and improving drug pricing transparency through new PBM models, are starting to pay off. These moves could support long-term growth.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in the coming year. While not all picks can be winners, previous recommendations have soared +112%, +171%, +209% and +232%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>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 CVS Health Corporation (CVS): Free Stock Analysis Report Herbalife Ltd (HLF): 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