CVS Health Inc. (NYSE:CVS) stock fell Wednesday after the healthcare giant announced plans to split into two publicly traded companies, even as it reported better-than-expected third-quarter results and raised its full-year outlook.
The company plans to separate its healthcare and retail pharmacy businesses following a strategic review by its board of directors.
CVS Health Plans Split Into Two Companies by 2028
The proposed separation would create two independent, publicly traded companies.
The healthcare solutions business will include Aetna, CVS Caremark, CVS Specialty, Oak Street Health and Signify Health. It will retain the CVS Health name.
Meanwhile, the retail pharmacy business, which will be named CVS Pharmacy, will include about 9,000 pharmacies, mail pharmacy services, MinuteClinic and Health100 technology services.
CVS Health Chairman and CEO David Joyner will serve as chairman and CEO of the healthcare solutions company. Current Group President Prem Shah will become CEO of CVS Pharmacy.
The company expects to complete the separation in the first half of 2028, subject to regulatory requirements and other customary conditions, including final board approval.
CVS Health Earnings and Revenue Beat Estimates
CVS reported adjusted earnings of $2.09 per share, beating Wall Street’s estimate of $1.65.
Revenue rose 5.4% year over year to $108.399 billion, topping analysts’ estimate of $104.695 billion.
Adjusted operating income increased 21.2% to $4.194 billion, supported by growth across all operating segments.
CVS generated $15.3 billion in operating cash flow during the first nine months and raised its full-year cash flow forecast to at least $15.5 billion from $11.5 billion.
CVS Health Insurance Business Shows Improvement
Health Care Benefits revenue rose 2.4% to $36.855 billion, driven by government programs. However, the company’s exit from the individual exchange business partly offset growth.
The medical benefit ratio improved to 91.3% from 92.8% a year earlier, reflecting stronger government business performance.
Medical membership fell to 26.1 million from 26.7 million a year earlier.
Health Services revenue increased 9.5% to $53.964 billion, driven by drug mix and brand inflation.
Meanwhile, Pharmacy & Consumer Wellness revenue declined 2% to $35.498 billion. However, prescriptions filled increased 1.9% on a 30-day equivalent basis, with total prescriptions reaching 470 million.
CVS Health Raises 2026 Earnings Outlook
CVS raised its 2026 adjusted earnings forecast to more than $8.20 per share, up from its previous range of $7.90 to $8.10. The new outlook topped analysts’ estimate of $8.04.
The company also expects revenue above $420 billion, above Wall Street’s estimate of $417.731 billion and its previous forecast of at least $414 billion.
During its earnings call, CVS said it expects its medical benefit ratio to land in the lower half of its previous range of 89.75%, plus or minus 25 basis points.
The outlook reflects continued caution about elevated medical costs.
CVS Health Sees Earnings Growth Beyond 2027
CVS expects improvements in its Medicare Advantage business to support 2027 results. However, elevated medical costs could remain a challenge.
The company expects Health Services adjusted operating income of at least $7 billion in 2027, despite pressure from its 340B business and expected pharmacy benefit management client losses.
CVS expects its 340B business to largely stabilize by the end of 2027. It also sees 2027 as a low point for Health Services earnings, with growth resuming afterward.
The company projects 2027 adjusted earnings of at least $8.65 per share, representing about 13% growth from its adjusted 2026 baseline.
CVS Price Action: CVS Health shares were down 12.33% at $80.13 at the time of publication on Wednesday, according to Benzinga Pro data.
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