CVS Health (NYSE: CVS) is set to report first-quarter earnings on Wednesday, with investors watching for its ability to manage two significant challenges: elevated medical costs in its insurance business and intense regulatory scrutiny of its pharmacy-services unit.
“The cadence dynamics, and the general headlines on PBM scrutiny, have meaningfully shifted sentiment and worry for downside,” Leerink analyst Michael Cherny said in an April note. Reaching $1.3 billion in adjusted operating income for the health services segment this quarter “will be an important first step to start to correct that,” he added.
Analysts expect the company to report adjusted earnings per share of $2.18 on revenue of $94.97 billion, according to FactSet consensus estimates. Wall Street will be closely watching the company’s medical cost ratio, a key measure of spending as a portion of premiums, with consensus estimates at 86.6 percent. Rivals UnitedHealth Group and Humana have already reported first-quarter results that beat analysts' estimates for this metric.
The company's stock has been volatile, falling 14 percent in January after the government proposed a lower-than-expected rate increase for Medicare Advantage plans in 2027, before jumping nearly 7 percent in April when the final rate was revised higher. The results will provide a crucial test for CEO David Joyner, who took over in 2024 after the stock fell over 40 percent amid rising post-pandemic medical costs.
CVS’s pharmacy benefit manager (PBM) business, a major part of its health services segment, faces continued pressure from lawmakers and regulators over its role in drug pricing. The company has a pending settlement with the Federal Trade Commission over allegations it inflated insulin prices, which CVS has denied. It is also fighting a Tennessee bill that would prohibit PBMs from owning pharmacies in the state.
The Aetna insurance unit, the third-largest provider of Medicare Advantage plans in 2025, has been grappling with higher-than-expected medical utilization from seniors. While competitors have signaled that costs may be stabilizing, investors are waiting to see if CVS can bring its own spending under control. The company's ability to manage this trend is critical to restoring investor confidence and achieving its earnings goals for the year.
The first-quarter results will be a key indicator of whether CVS's turnaround strategy is taking hold. Management's ability to navigate the pressures on its PBM and control costs in its insurance arm will be critical for the stock's performance. Investors will be listening closely to the post-earnings call for updates on both fronts.
This article is for informational purposes only and does not constitute investment advice.
