By Amina Niasse
NEW YORK, May 6 (Reuters) – CVS Health significantly raised its full-year profit forecast on Wednesday, and reported higher first-quarter earnings from the pharmacy management business and strong medical cost controls in its government-sponsored health plans.
Shares of CVS, which also runs a large retail pharmacy chain, rose over 9% in morning trading.
CVS said its new forecast reflects management of medical costs in its Aetna health insurance business, which it described as being above historical levels and likely to remain so.
“We’re improving our capability of forecasting, so the cost trend did not surprise me,” Chief Financial Officer Brian Newman said in an interview.
The company raised both ends of its 2026 profit forecast by 30 cents and now expects to earn $7.30 to $7.50 per share. The new midpoint is far above analysts’ estimates of $7.16 per share, according to LSEG data.
A more profitable mix of drugs boosted earnings at Caremark, its pharmacy benefit manager, the CFO said.
CEO David Joyner said during a conference call with investors that the company is confident it can keep its pharmacy benefit manager competitive while lowering costs for wildly popular GLP-1 weight-loss drugs.
Leerink analyst Michael Cherny called the quarter very strong and said it “should continue recent momentum as CVS gets back on the earnings power opportunity track.”
CONSERVATIVE OPTIMISM
CVS has now exceeded Wall Street expectations for five successive quarters after taking a conservative approach to its forecasts, as it makes progress on its turnaround. In 2024, the company had several quarterly misses and replaced its CEO.
CVS’s Aetna insurance business reported a medical loss ratio – or the percentage of premiums spent on medical services – of 84.6%, below analysts’ estimates of 87.58%.
The company reported a medical loss ratio of 87.3% in the prior year. It forecast a rate of 90.5% plus or minus 50 basis points for 2026.
Adjusted first-quarter profit was $2.57 per share, topping analysts’ average estimate by 37 cents. Revenue rose to $100.4 billion, beating expectations of $95.1 billion.
Woonsocket, Rhode Island-based CVS reported $48.237 billion in revenue for its health services segment, which includes its Caremark PBM, an 11% increase.
The company settled with the Federal Trade Commission in April regarding Caremark’s payment model, which has since shifted to charging flat fees.
Aetna has a sizeable exposure to Medicare Advantage plans, which manage healthcare claims for the U.S. program for adults aged 65 and older and people with disabilities.
Rivals, including UnitedHealth and Humana, have detailed higher Medicare Advantage medical costs and said government reimbursement is too low when compared to spending on members’ medical services.
The U.S. government in April said it would raise 2027 payments to insurers for those plans by 2.48% on average.
The CFO said the increase still does not match cost estimates for next year. The company will focus on pricing changes to address the shortfall or consider changes to benefits, he said.
PHARMACY SLOWDOWN
CVS Health’s pharmacy business grew 5% in 2025, after purchasing pharmacies from former rival Rite Aid, and gained 9 million customers after finalizing its deal.
Though the company was able to fill more prescriptions and dispense more expensive drugs, operating income for that unit fell 8.8% from the year-ago quarter to $1.19 billion.
CVS said that business has become more expensive to operate due to regulatory changes impacting the price of certain drugs and a smaller share of cold and flu illnesses being treated.
A spokesperson for CVS said the pharmacy’s slowed profit growth is due to temporary factors, and that the company expects revenue to increase on a yearly basis.
(Reporting by Amina Niasse; additional reporting by Sriparna Roy in Bengaluru; Editing by Caroline Humer, Lincoln Feast and Bill Berkrot)
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