Diversified healthcare company CVS Health (NYSE: CVS) announced better-than-expected revenue in Q1 CY2025, with sales up 7% year on year to $94.59 billion. Its non-GAAP profit of $2.25 per share was 34.6% above analysts’ consensus estimates.
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CVS Health (CVS) Q1 CY2025 Highlights:
- Revenue: $94.59 billion vs analyst estimates of $93.18 billion (7% year-on-year growth, 1.5% beat)
- Adjusted EPS: $2.25 vs analyst estimates of $1.67 (34.6% beat)
- Adjusted EBITDA: $5.09 billion vs analyst estimates of $4.29 billion (5.4% margin, 18.7% beat)
- Management raised its full-year Adjusted EPS guidance to $6.10 at the midpoint, a 3.8% increase
- Operating Margin: 3.6%, in line with the same quarter last year
- Free Cash Flow Margin: 4%, similar to the same quarter last year
- Locations: 9,085 at quarter end, down from 9,282 in the same quarter last year
- Same-Store Sales rose 14.2% year on year (5.3% in the same quarter last year)
- Market Capitalization: $76.53 billion
StockStory’s Take
CVS Health’s first quarter results were shaped by operational improvements across its healthcare benefits, pharmacy, and consumer wellness segments. Management cited strong execution in prescription volume growth, enhanced digital engagement, and improved operating efficiencies, while also acknowledging early pressure in certain healthcare delivery businesses. Notable leadership changes were also discussed, with Brian Newman set to become Chief Financial Officer and Amy Compton-Phillips joining as Chief Medical Officer, further rounding out the executive team.
Looking ahead, CVS Health’s updated guidance reflects ongoing caution around medical cost trends, particularly in Medicare Advantage and the individual exchange business. CEO David Joyner emphasized the company’s strategy to focus on areas with clear competitive advantages, including Medicare and commercial offerings, while exiting underperforming segments. The new partnership with Novo Nordisk to expand access to GLP-1 weight loss drugs and the rollout of bundled prior authorization processes are expected to support future growth and operational stability.
Key Insights from Management’s Remarks
Operational execution and portfolio adjustments were central themes in management’s discussion of quarterly results and strategy. CVS Health’s leadership addressed ongoing macroeconomic and regulatory challenges while highlighting targeted innovations and business exits:
- Healthcare segment stabilization: Management cited improved performance in Medicare Advantage, driven by rationalized product mix, operational discipline, and early signs of medical cost trend stabilization, though group Medicare Advantage remains pressured by elevated in-patient claims.
- Exit from individual exchange business: CVS Health will exit its Aetna ACA individual exchange plans in 2026, after determining no viable path to profitability. This follows several quarters of losses and is expected to eliminate related variable losses, allowing a sharper focus on Medicare, commercial, and Medicaid lines.
- Pharmacy and consumer wellness growth: The pharmacy and consumer wellness segment benefited from increased prescription volumes, improved drug purchasing, and strong execution in retail locations. Same-store prescription volumes rose nearly 7% year-over-year, with the business gaining market share.
- Innovative access initiatives: A new partnership with Novo Nordisk will increase access to Wegovy, a GLP-1 weight loss drug, through CVS’s pharmacy network and Caremark benefit manager. Management also highlighted new bundled prior authorization processes to reduce administrative burden and improve patient outcomes, especially in cancer care.
- Cost and supply chain vigilance: The team is closely monitoring emerging tariff risks and potential changes in consumer demand for vaccines, with contingency plans for sourcing and pricing as necessary. The company also continues to invest in digital engagement and operational technology to drive efficiency.
Drivers of Future Performance
Management’s outlook for 2025 centers on maintaining operational discipline while navigating industry headwinds, with a focus on core health insurance and pharmacy businesses:
- Medicare Advantage and cost trends: The company highlighted ongoing monitoring of medical cost trends in Medicare Advantage, with improvements in some areas but persistent pressure in group plans. Management expects stabilization will be key to margin recovery.
- Pharmacy access and product innovation: The expanded GLP-1 and biosimilar offerings, along with pharmacy pricing models like CostVantage, are expected to broaden access and support revenue growth, though their full impact will unfold over time.
- Regulatory and market risk management: CVS Health cited ongoing uncertainties from state-level pharmacy legislation, tariffs, and evolving vaccine protocols as risk factors. Management is actively planning for these variables in its strategy and long-term bids.
Top Analyst Questions
- Justin Lake (Wolfe Research): Asked about segment-specific medical cost trends in Medicare Advantage. Management pointed to early signs of stabilization but noted group Medicare Advantage remains pressured.
- Lisa Gill (JP Morgan): Inquired about the impact of the Novo Nordisk partnership and formulary changes for GLP-1 drugs. Management clarified that expanded access to Wegovy will not affect current guidance and detailed the mechanics of coverage and pricing.
- Stephen Baxter (Wells Fargo): Sought clarity on the financial impact of prior period reserve development and the exit from individual exchange products. Management explained the majority of favorability stemmed from Medicare and that variable losses will be eliminated after the exit.
- Elizabeth Anderson (Evercore ISI): Asked if the Wegovy deal or tariffs are reflected in guidance. Management confirmed Wegovy is not included in guidance and addressed contingency planning for tariffs and potential consumer impacts.
- Andrew Mok (Barclays): Requested details on operational pressures at Oak Street Health. Management acknowledged some cost trend pressure and described ongoing monitoring and early-stage nature of the business.
Catalysts in Upcoming Quarters
In the months ahead, the StockStory team will closely watch (1) the pace and impact of CVS Health’s exit from the ACA individual exchange business, (2) the performance and cost trends in Medicare Advantage, especially group plans, and (3) the rollout and uptake of new pharmacy initiatives like the Wegovy partnership and bundled prior authorization. We will also track regulatory developments, particularly on pharmacy legislation and tariffs, as potential swing factors for future results.
CVS Health currently trades at a forward P/E ratio of 9.7×. Is the company at an inflection point that warrants a buy or sell? See for yourself in our free research report.
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