CVS gains: (CVS) increases shares

After a sad 2024, CVS health It could be starting to turn around.

Some investors seem convinced, especially after the pharmacy retail chain on Wednesday registered a great rhythm in the fourth quarter and a 2025 profit perspective that was in line with expectations.

CVS's shares now rise more than 45% during the year, unlike the company's main retail rival Walgreenswhose stock has increased almost 3%. Actions of other insurers Unitedhealth Group and CIGNA They rise around 4% and almost 8%, respectively.

The optimistic quarterly results can be a sign that the brightest days are ahead for the CVS, or at least that things may not be as bad as they were last year.

The company's shares collapsed more than 40% in 2024 after earnings estimates for three quarters were lost and withdrew their annual forecast, largely due to the highest medical costs than expected in their insurance unit, along with other problems such as pharmacy reimbursement pressure.

CVS is not out of the forest yet. The medical costs were less serious during the fourth quarter, but they will probably remain raised in 2025, since more old people go to hospitals and medical offices and use more medical care benefits.

But some analysts are more optimistic about the company's ability to navigate those challenges in the future and achieve their adjusted profits from 2025 per year of $ 5.75 to $ 6 per share. CVS has followed the closures of stores and other cost cuts, and its new CEO David Joyner has spent much of its first 100 days to the helm focusing on the Aetna company insurance unit.

“The pieces are in place to [CVS to return] So it has been a performance of the operations, “said Readink Partners Analyst Michael Cherny, who updated the actions on Wednesday after the results.

Cantor Fitzgerald analysts also improved CVS actions on Wednesday, citing “greater confidence in a successful change.”

CVS has already taken measures for the rights of its insurance business, which includes plans for the low -price health care law, Medicare Advantage and Medicaid, as well as dental and vision vision. The company left certain non -profitable health plans in 2024, and raised the premiums to register less members this year.

In a research note, the analysts of Cantor Fitzgerald said that they are “increasingly safer” that CVS will improve the margins in their Medicare Advantage business and return to the “normal levels” by 2027.

CVS has said you want to recover Medicare Advantage business at a margin from 3% to 5%. They were in the negative range of 4.5% to 5% at the end of 2024, said CVS Tom Cowhey during a profit call on Wednesday.

CV and other insurers, such as UnitedHealth Group and Human, have seen medical costs increase during the last year as more patients with Medicare advantage return to hospitals for the procedures that delayed during the pandemic.

Medicare Advantage, a private administration health insurance plan hired by Medicare, has long been a growth and profits promoter for insurers. But investors have been concerned about fugitive costs linked to these plans, which cover more than half of all Medicare beneficiaries.

To improve the margins, the company plans to reduce the membership of Medicare Advantage through a “high percentage of a single digit” since the late 2024, executives said Wednesday. Aetna had 4.4 million members of Medicare Advantage to December, compared to 3.5 million from the previous year, according to the launch of the company's fourth quarter.

In general, CVS executives said they hope to reduce insurance members by more than 1 million this year, including 800,000 in the individual market. Patients who lose insurance can register in a new Medicare Advantage plan or join the traditional Medicare plans.

AETNA also obtained better qualifications from Medicare Advantage Star for the year of Payment 2025, which should increase its federal payments in 2026. These crucial grades help patients to compare the quality of Medicare health plans and medicines and determine how much an insurance company receives in bond payments from the Centers for Medicare and Medicaid services.

In the earning call, Joyner said the company is pressing for the highest payment rates of the Government through Medicare Advantage. He said that the rates proposed for 2026 do not take into account the highest medical costs during the last year.

The Biden administration in January proposed to increase Medicare Advantage reimbursement rates by 2.2% in 2026, above the 0.2% drop in this year's rates. But Cantor analysts also said that the Medicare Advantage refund rate can increase, projecting a finished increase from 2% to 2.8%.

“We assume an improvement rate environment … maintaining the grades of the stars, and [medical] Trend costs that do not exceed 2024 levels, “the analysts wrote.

It is difficult to predict how the trends of medical costs will be seen throughout the insurance industry in 2025. But this time higher medical costs are baked in the guidance of the whole year of CVS.

The perspective assumes that the trends that the company saw in 2024 will move this year despite the most favorable medical costs for the company in the fourth quarter, Tanquilut said.

“The first readings for '25 or at least the end of 2002 is that it is beginning to improve. But they did not assume that improvement in the 2025 guide,” Tanquilut told CNBC. “Then it seems that there is a rise in its numbers by 2025.

Last year, the company also said that it would make significant changes in its Medicare Advantage plans by 2025, such as increasing co -payment and premiums and reducing certain health benefits. That will eliminate expenses related to these benefits and move patients who need or want to use them away.

Other insurers as a human, the second most large Medicare advantage insurer, are similarly sacrificing their offers of plans by 2025 to reduce the minor profit membership. Human is dropping 550,000 clients from Medicare Advantage in less profitable markets. But the company has said that people who lose access to their existing plans will probably have another option for the advantage of a human Medicare.

CVS's actions are surpassing most of their medical care rivals, both on the sides of insurance and retail pharmacy. Jefferies Analist Brian Tanquilut said it is probably due to the unique position of CVS as a company that has a health insurer, a retail pharmacy chain and a pharmacy benefits manager, or PBM, called CaMark.

“I think what they are starting to show is the real synergy … having the three assets,” Tamilut said.

PBMs such as Caremark are in the drug supply chain center in the United States, negotiating drug refunds with manufacturers in the name of insurers, creating lists of preferred medications covered by health plans and reimbursement pharmacies for recipes.

That means that CaMark is also at the intersection of CVS retail pharmacy operation and its Aetna insurer, which increases the competitive advantage of both businesses.

For example, CaMark in some cases directs medication recipes to CVS retail pharmacies. That has helped company pharmacies to obtain a significant recipe market share about its main rival, Walgreens, who has been fighting to operate as a pharmacy business largely independent, said Tamilut.

Other insurers, such as Cigna and UnitedHealth Group, also have PBMs. But the fact that CVS has a retail pharmacy “simply unites everything and differentiates it from others,” Tamilut added.

That does not necessarily mean that other insurers have a lower performance. Tanilut said that Unitedhealthcare, the Insurance arm of the UnitedHealth group, is still “better in class” in the industry.

Other insurance companies have their own obstacles apart from higher medical costs, such as Human See a fall in your Medicare Advantage Star qualifications for the year.

But the history of CVS has been much more complicated than other insurers given its business model, and the company could now be reaching a point where “the three commercial segments are clicking,” Tamilut said.