Company Overview
CVS Health represents one of 2025’s most dramatic corporate turnarounds, with shares rebounding approximately 40% year-to-date after crashing 43% in 2024 amid disappointing quarterly results and elevated medical costs in its Aetna insurance business. The transformation accelerated dramatically in Q3 2025, when CVS reported record revenue of $102.9 billion (up 7.8% year-over-year, beating the $98.29 billion estimate) and adjusted EPS of $1.60 (crushing the $1.36 consensus), prompting the company to raise its full-year adjusted EPS guidance to $6.55-$6.65 – marking the third guidance increase of the year.
What makes CVS particularly compelling is the multi-pronged turnaround executed by CEO David Joyner, who took over in October 2024 with a mandate to fix the struggling healthcare conglomerate. The improvements are broad-based: the Pharmacy & Consumer Wellness segment grew revenues 12% in Q2 to $33.58 billion while expanding adjusted operating income 8%, the Healthcare Benefits segment (Aetna) saw adjusted operating income surge 39.4% in Q2 driven by improved Medicare Advantage performance and better star ratings, and the company is on track to deliver $7.5 billion in cash flow from operations for 2025. Joyner’s strategic initiatives include a $2 billion cost-cutting program over several years, completion of a three-year plan to close 900 underperforming stores (while maintaining a strong 27.8% retail pharmacy script share), implementation of the transparent CostVantage pricing model for all commercial prescriptions, and critically, the decision to exit unprofitable ACA individual exchanges in 2026 to focus on higher-margin businesses. With the company forecasting double-digit earnings growth in 2026 and trading at just 10.18x forward earnings – a significant discount to the industry average of 14.07x – CVS offers compelling value as the turnaround gains momentum.
Key Technical and Fundamental Drivers
Q3 Record Revenue → $102.9B Beat CVS delivered record Q3 revenue of $102.9 billion (up 7.8% YoY), handily beating the $98.29 billion estimate, with adjusted EPS of $1.60 crushing consensus of $1.36 and prompting the third guidance raise of 2025.
Three Guidance Increases in 2025 → Now $6.55-$6.65 EPS The company has raised full-year adjusted EPS guidance three times in 2025: from $5.75-$6.00 initially, to $6.00-$6.20 in Q1, to $6.30-$6.40 in Q2, and now to $6.55-$6.65 following Q3’s strong performance.
Aetna Insurance Turnaround → 39.4% Operating Income Surge The troubled healthcare benefits segment saw adjusted operating income jump 39.4% in Q2, driven by improved Medicare Advantage performance, better star ratings, and favorable prior period development – marking a dramatic reversal.
Pharmacy Momentum → 27.8% Script Share Despite closing 900 stores over three years, CVS maintained a commanding 27.8% retail pharmacy script share (up 60 basis points year-over-year) while growing pharmacy revenues 12% through execution and CostVantage pricing model.
2026 Double-Digit Growth Forecast → Turnaround Accelerates Management forecasts double-digit adjusted EPS growth in 2026 as the transformation continues, with improved Aetna margins, pharmacy strength, and cost savings driving sustainable earnings expansion.
Market Takeaway
CVS Health’s transformation from 2024’s disaster story to one of 2025’s best-performing turnarounds demonstrates the power of decisive leadership and strategic focus. CEO David Joyner’s willingness to make tough calls – exiting unprofitable ACA exchanges, closing 900 stores while protecting market share, implementing transparent CostVantage pricing that separates CVS “from the pack” – is delivering tangible results across all three business segments. The 39.4% surge in Aetna’s adjusted operating income represents a particularly critical milestone, as the insurance unit had been the primary drag on overall performance throughout 2024.
The company’s integrated model – combining 9,000+ retail pharmacies, Caremark PBM processing 2 billion annual claims, Aetna serving 27 million medical members, and Oak Street Health primary care – creates powerful synergies that competitors cannot easily replicate. The CostVantage pricing model, now processing all commercial prescriptions, eliminates cross-subsidization and provides transparency that resonates with employers and payers. Meanwhile, CVS Pharmacy’s inclusion as the first retail pharmacy in Novo Nordisk’s NovoCare network positions it perfectly to capitalize on the explosive GLP-1 weight management drug trend, which now represents 15% of employer pharmacy costs and has doubled in spend over two years.
Trading at 10.18x forward earnings versus the 14.07x industry average, CVS offers approximately 40% valuation upside to peers despite demonstrating superior execution. Morningstar’s $92 fair value estimate (representing significant upside from current levels) reflects improving near-term prospects and stronger cash flow generation. With $7.5 billion in operating cash flow expected for 2025, a commitment to returning capital through the $1.7 billion in dividends paid year-to-date, and management’s confidence in double-digit 2026 EPS growth as the transformation accelerates, CVS stands out as one of the most compelling turnaround opportunities in healthcare. The 40% year-to-date gain has merely returned the stock to reasonable valuations after the 2024 collapse – the real upside lies ahead as the operational improvements drive sustained earnings growth through 2026 and beyond.