Story Stocks^®

CVS Health (CVS) boosted its FY25 outlook again, lifting EPS to $6.60–$6.70 from $6.55–$6.65, and revenue to at least $400 bln from $397.3 bln, marking its fourth EPS upward revision and sending shares sharply higher. FY26 EPS guidance of $7.00-$7.20 aligns with consensus, while FY26 revenue of at least $400 bln trails expectations, suggesting measured top-line growth against tighter utilization trends. Still, long-term goals impressed: CVS now targets mid-teens adjusted EPS CAGR through 2028, supported by improving claims costs, higher-margin care delivery, PBM repricing tailwinds, cost discipline, and scaling of its value-based primary care platform.

• CVS’s Health Care Benefits segment continues to push the recovery theme despite elevated medical costs. The 92.8% MBR in Q3 illustrated lingering utilization pressure, but sequential improvement supports management's confidence in 2025/2026 margin expansion.
• Health Services (Caremark PBM) remains a primary earnings engine, aided by contract repricing, client renewals, specialty drug mix, and tighter formulary management lifting visibility into 2026.
• Pharmacy & Consumer Wellness benefits from prescription volume growth, stronger front-store trends, better vaccine utilization, and retail cost optimization -- a steady pillar bolstering FY25’s raised EPS guide.
• FY26 EPS of $7.00–$7.20 looks achievable but not aggressive, signaling CVS is pacing growth through medical-cost moderation, efficiency gains, and integration benefits from Oak Street/Aetna.
• Long-term EPS CAGR in the mid-teens through 2028 rests on scaling value-based care economics, Caremark repricing benefits compounding, clinic maturation, and structurally better utilization trends.
• Despite Oak Street Health softness and care-delivery margin drag, CVS has reiterated progress on reducing operating losses and achieving breakeven path visibility by 2026.
• Another swing factor emerged today: “Engagement as a Service”, a tech-led consumer activation platform that could expand digital care touchpoints, drive script retention, deepen PBM relationships, and improve outcomes.
• High-margin software revenue with subscription economics could materially lift profitability beginning 2026.

Briefing.com Analyst Insight:

CVS enters 2025 with tangible momentum, highlighted by four EPS raises, strengthening utilization trends, and PBM repricing entering the model at scale, and investors are finally pricing in execution over skepticism. The FY26 revenue guide is light, but cost leverage, benefit-ratio normalization, and clinic turnaround potential underpin earnings power rather than pure top-line expansion. “Engagement as a Service” is the most under-appreciated lever: recurring technology revenue and improved member retention could structurally re-rate margins beyond retail and insurance cyclicality. Near-term headwinds remain -- MBR normalization is not linear, Oak Street requires discipline, and FY26 isn’t a breakout year on revenue -- but the multi-year EPS CAGR framework signals confidence seldom seen in this story since the Aetna deal.