Aetna’s solid quarter boosts outlook for CVS

CVS Health Corp. raised its earnings outlook for the year after profit and revenue in the first quarter exceeded analyst expectations, the latest in a string of positive reports from US health conglomerates.

The Woonsocket, R.I.-based company increased its outlook for 2026 adjusted earnings to $7.30 to $7.50 a share, it said in a statement Wednesday. The 30-cent increase puts the new range above Wall Street estimates.

CVS shares rose about 7.7 percent in Thursday trading.

The company, which includes a retail pharmacy, an insurer, Aetna, and a pharmacy benefits manager, followed every major competitor in projecting optimism for the year after a challenging 2025. Health insurance companies have been raising prices and cutting benefits for some patients, and pulling less profitable plans from the market.

Most of the increase in CVS’s adjusted earnings guidance came from a benefit from the prior year’s reserves, chief financial officer Brian Newman said in an interview. The company set aside more money to pay insurance claims than it ultimately needed last year, which benefits earnings this year.

Five cents is coming from better-than-expected performance in pharmacy businesses, where profitability is improving, he said. Adjusted operating income in the segment should increase 2 percent this year compared to last, higher than previously anticipated, he said.

The company has been shifting how its pharmacies get paid for medicines. Because of this change, it is no longer losing money on GLP-1 drugs, chief executive David Joyner said on a conference call with analysts. The drugs have also recently become profitable for rival pharmacy chain Walgreens.

Adjusted earnings of $2.57 a share in the quarter surpassed all analyst estimates in a Bloomberg survey.

Analysts welcomed the results, writing in notes to clients that they demonstrated strength in CVS’s insurance business. The quarterly profit was “primarily reflecting broad-based topline strength and a notable improvement" in Aetna’s profitability, RBC Capital Markets analyst Ben Hendrix wrote.

The company’s Aetna insurance segment saw some areas of out-performance, Newman said. Aetna spent a smaller percentage of premiums on medical costs than Wall Street analysts expected.

The company has been making changes over the last few years to boost profitability, Newman said. For example, Aetna installed more actuaries in key positions, adding to the company’s financial expertise in an effort to improve its ability to predict costs and price plans accordingly. It also raised prices on some plans and stopped selling Affordable Care Act plans, which were losing money.

Profit in its pharmacy segment dropped from a year ago, partially due to bad weather and lighter-than-expected seasonal illnesses, the company said.

The guidance boost shows CVS’s confidence even as it faces regulatory pressure on major areas of its business. Federal payment rates for Medicare Advantage, a private version of the government health plan for seniors that has historically been a major profit driver, aren’t increasing as much as companies want, threatening future profitability.

Newman said that the 2.5 percent increase for Medicare Advantage payments in 2027 won’t be enough to keep up with rising medical costs, and that CVS may cut benefits for patients in order to achieve its financial goals.

“Could it change benefits? Possibly," he said, noting that the company remains committed to its previously stated goal of boosting Medicare Advantage margins to between 3 percent and 4 percent by 2028. He said margins this year will be higher than last year, but declined to provide specific numbers.