CVS Health Corp. (CVS) delivered a solid fourth-quarter performance on Tuesday, beating analyst expectations even as it navigates significant changes to Medicare programs that are reshaping its profitability picture.
The healthcare giant posted sales of $105.69 billion for the quarter, topping the consensus estimate of $103.59 billion. Total revenues jumped 8.2% year-over-year, with growth coming from every corner of the business.
Adjusted earnings landed at $1.09 per share, ahead of the 99-cent analyst estimate but down from $1.19 in the prior year. The decline reflects pressure in the Health Care Benefits segment, where changes to the Medicare Part D program driven by the Inflation Reduction Act have altered the seasonal rhythm of when revenues and costs hit the books. Adjusted operating income fell 4.8% to $2.59 billion.
How the Business Segments Performed
The Health Care Benefits segment saw revenues climb 10.1% to $36.29 billion, largely thanks to growth in the Government business. That increase is directly tied to how the Inflation Reduction Act has reshaped Medicare Part D economics.
In Health Services, which handles pharmacy benefit management, sales rose 9% to $51.24 billion. The growth came from pharmacy drug mix and brand inflation, though continued price pressure from clients ate into some of those gains.
The Pharmacy & Consumer Wellness segment delivered the strongest growth, with sales up 12.4% to $37.66 billion. That performance was driven by favorable drug mix and higher prescription volume, including a boost from CVS's acquisition of Rite Aid prescription files. Ongoing pharmacy reimbursement pressure and new generic drug launches partially offset the gains.
Key Operational Metrics
The medical benefit ratio held steady at 94.8% in the fourth quarter, matching the prior year. Better underlying performance in the Government business was balanced out by those Medicare Part D seasonality shifts from the Inflation Reduction Act.
Medical membership totaled 26.59 million, down 504,000 members year-over-year. The company saw declines in individual exchange and Government product lines, though Commercial ASC membership grew.
On the pharmacy side, prescriptions filled jumped 6.3% to 473.8 million, powered by increased utilization and the additional volume from the Rite Aid prescription acquisitions.
Looking Ahead to 2026
CVS Health reaffirmed its fiscal 2026 adjusted earnings guidance of $7.00-$7.20 per share, right in line with the Street consensus of $7.17. Management said the guidance "highlights our strong position for 2026."
The company did adjust some other forward-looking numbers, though. Cash flow from operations guidance was revised down to at least $9.0 billion from the previous target of at least $10.0 billion.
For revenue, CVS expects at least $400 billion in fiscal 2026, which falls short of the consensus estimate of $409.77 billion. Adjusted operating income is projected at $15.07 billion to $15.41 billion.
CVS Price Action: CVS Health shares were down 0.32% at $75.53 at the time of publication on Tuesday.
