CVS Up on Medicare Advantage Strength: Is It a Buy Before Q2 Earnings?

CVS Health Corporation CVS is gaining investor attention as the stock trends higher ahead of its second-quarter earnings release, scheduled for July 30, 2025. A key catalyst behind the recent uptick occurred in mid-June, when Bloomberg reported that proposed Medicare Pharmacy Benefit Manager (PBM) limits were stripped from the Senate’s version of the tax bill, removing a major overhang for CVS Health and other healthcare insurers.As one of the nation’s largest PBM operators through its Caremark division, CVS stands to benefit from reduced regulatory pressure, alongside peers like Cigna CI and UnitedHealth UNH. Combined with strong first-quarter earnings, upgraded full-year guidance and operational momentum across its healthcare segments, CVS is entering the second-quarter earnings season with growing market confidence. Here's a closer look at the drivers behind the stock’s recent rise.Turnaround After 2024 HeadwindsCVS Health has staged a notable turnaround in 2025 after navigating significant challenges in recent years, including the closure of approximately 900 stores between 2022 and 2024 and utilization-related pressure within its Aetna health insurance segment. These headwinds had weighed heavily on the stock, but it has recovered much of the lost ground so far in 2025. CVS shares have rallied nearly 50% year to date, banking on strong strategic execution in the first quarter of 2025 and improved operational efficiency.During this period, archrivals like Cigna grew 10.9% while United Health shares dipped 39.2%.YTD Price PerformanceImage Source: Zacks Investment ResearchStrong Q1 Performance, Segment Growth and Upgraded 2025 GuidanceCVS Health delivered strong first-quarter 2025 results in May, reporting a 7% year-over-year revenue increase and a sharp jump in adjusted EPS to $2.25 from $1.31 a year earlier. The company also raised its full-year adjusted EPS guidance to a range of $6.00–$6.20 (up from $5.75–$6.00) and now expects around $7 billion in cash flow.Growth was broad-based across CVS’ three business segments, Health Care Benefits, Health Services and Pharmacy & Consumer Wellness, which grew 8%, 7.9%, and 11.1%, respectively, in the first quarter. Aetna, its insurance unit, benefited from higher Medicare Advantage star ratings and favorable prior-year cost adjustments, reinforcing the company’s earnings momentum and operational efficiency.The Zacks Consensus Estimate for CVS’ 2025 earnings per share suggests a 12.9% improvement from 2024.Image Source: Zacks Investment ResearchCVS to Benefit From Senate's Removal of PBM and Medicare Advantage CutsAs stated earlier, CVS Health is gaining from the Senate’s decision to drop proposed limits on PBMs and cuts to Medicare Advantage in the latest tax bill. This removes a key regulatory risk for its Caremark PBM unit. The decision also boosts Aetna’s Medicare Advantage business by preserving federal funding, supporting stable revenues and continued investment in member services like in-home care.Additionally, CVS is enhancing care delivery by processing 95% of prior authorizations within 24 hours and expanding value-based care into oncology and cardiology. Its pharmacy unit, which fills over 1.7 billion prescriptions annually, leads in adherence and affordability, driven by initiatives such as low-cost access to Wegovy and Cordavis, delivering over $1 billion in client savings.CVS Health Offers Attractive ValuationIn terms of valuation, CVS Health’s forward 12-month price-to-earnings (P/E) is 9.83X, a discount to the S&P 500’s 22.63X.Image Source: Zacks Investment ResearchThe stock is trading at a premium to the company’s competitor Cigna’s P/E of 9.63X. However, it is trading at a discount to United Health’s 12.85X.CVS stock’s premium over CI may be justified by its scale, efficiency and strategic focus on digital health, AI and value-based care. Meanwhile, its discount to the S&P 500 offers an attractive entry point for long-term investors seeking stable, growth-oriented healthcare exposure.Buy CVS Health NowWith strong operational momentum, easing regulatory headwinds and an attractive valuation, CVS Health stands out as a solid buy ahead of its second-quarter earnings. A near 50% YTD rally reflects renewed investor confidence driven by robust first-quarter results, raised guidance and continued strength across business segments. The Senate’s removal of PBM and Medicare Advantage cuts further boosts the outlook for its Caremark and Aetna units. While Cigna has seen modest gains and UnitedHealth faces sharp declines, CVS offers a stronger growth profile, enhanced by its focus on value-based care and digital health. Carrying a Zacks Rank #2 (Buy), CVS presents an appealing opportunity for investors seeking stable, growth-oriented healthcare exposure. 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Click to get this free report UnitedHealth Group Incorporated (UNH): Free Stock Analysis Report Cigna Group (CI): 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