CVS Up on Medicare Advantage Strength: Is It a Buy Before Q2 Earnings?

CVS Health Corporation
CVS is gaining
investor attention as the stock trends higher ahead of its
second-quarter earnings release, scheduled for July 30, 2025. A key
catalyst behind the recent uptick occurred in mid-June, when
Bloomberg reported that proposed Medicare Pharmacy Benefit Manager
(PBM) limits were stripped from the Senate's version of the tax
bill, removing a major overhang for CVS Health and other healthcare
insurers.

As one of the nation's largest PBM operators through its
Caremark division, CVS stands to benefit from reduced regulatory
pressure, alongside peers like
Cigna
CI and
UnitedHealth
UNH. Combined
with strong first-quarter earnings, upgraded full-year guidance and
operational momentum across its healthcare segments, CVS is
entering the second-quarter earnings season with growing market
confidence. Here's a closer look at the drivers behind the stock's
recent rise.

Turnaround After 2024 Headwinds

CVS Health has staged a notable turnaround in 2025 after
navigating significant challenges in recent years, including the
closure of approximately 900 stores between 2022 and 2024 and
utilization-related pressure within its Aetna health insurance
segment. These headwinds had weighed heavily on the stock, but it
has recovered much of the lost ground so far in 2025. CVS shares
have rallied nearly 50% year to date, banking on strong strategic
execution in the first quarter of 2025 and improved operational
efficiency.

During this period, archrivals like Cigna grew 10.9% while
United Health shares dipped 39.2%.

YTD Price Performance

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Source: Zacks Investment Research

Strong Q1 Performance, Segment Growth and Upgraded 2025
Guidance

CVS Health delivered strong first-quarter 2025 results in May,
reporting a 7% year-over-year revenue increase and a sharp jump in
adjusted EPS to $2.25 from $1.31 a year earlier. The company also
raised its full-year adjusted EPS guidance to a range of
$6.00-$6.20 (up from $5.75-$6.00) and now expects around $7 billion
in cash flow.

Growth was broad-based across CVS' three business segments,
Health Care Benefits, Health Services and Pharmacy & Consumer
Wellness, which grew 8%, 7.9%, and 11.1%, respectively, in the
first quarter. Aetna, its insurance unit, benefited from higher
Medicare Advantage star ratings and favorable prior-year cost
adjustments, reinforcing the company's earnings momentum and
operational efficiency.

The Zacks Consensus Estimate for CVS' 2025 earnings per share
suggests a 12.9% improvement from 2024.

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Source: Zacks Investment Research

CVS to Benefit From Senate's Removal of PBM and Medicare
Advantage Cuts

As stated earlier, CVS Health is gaining from the Senate's
decision to drop proposed limits on PBMs and cuts to Medicare
Advantage in the latest tax bill. This removes a key regulatory
risk for its Caremark PBM unit. The decision also boosts Aetna's
Medicare Advantage business by preserving federal funding,
supporting stable revenues and continued investment in member
services like in-home care.

Additionally, CVS is enhancing care delivery by processing 95%
of prior authorizations within 24 hours and expanding value-based
care into oncology and cardiology. Its pharmacy unit, which fills
over 1.7 billion prescriptions annually, leads in adherence and
affordability, driven by initiatives such as low-cost access to
Wegovy and Cordavis, delivering over $1 billion in client
savings.

CVS Health Offers Attractive Valuation

In terms of valuation, CVS Health's forward 12-month
price-to-earnings (P/E) is 9.83X, a discount to the S&P 500's
22.63X.

Image
Source: Zacks Investment Research

The stock is trading at a premium to the company's competitor
Cigna's P/E of 9.63X. However, it is trading at a discount to
United Health's 12.85X.

CVS stock's premium over CI may be justified by its scale,
efficiency and strategic focus on digital health, AI and
value-based care. Meanwhile, its discount to the S&P 500 offers
an attractive entry point for long-term investors seeking stable,
growth-oriented healthcare exposure.

Buy CVS Health Now

With strong operational momentum, easing regulatory headwinds
and an attractive valuation, CVS Health stands out as a solid buy
ahead of its second-quarter earnings. A near 50% YTD rally reflects
renewed investor confidence driven by robust first-quarter results,
raised guidance and continued strength across business segments.
The Senate's removal of PBM and Medicare Advantage cuts further
boosts the outlook for its Caremark and Aetna units. While Cigna
has seen modest gains and UnitedHealth faces sharp declines, CVS
offers a stronger growth profile, enhanced by its focus on
value-based care and digital health. Carrying a Zacks Rank #2
(Buy), CVS presents an appealing opportunity for investors seeking
stable, growth-oriented healthcare exposure. You can see

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This article originally published on Zacks Investment Research
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