CVS Health blew past first-quarter earnings estimates early Thursday, while raising its full-year outlook by a smaller amount. The pharmacy and health benefits giant also announced an agreement to make Novo Nordisk's Wegovy its preferred GLP-1 obesity medication. CVS stock is sharply higher, while NVO also jumped in early stock market action.
CVS said its health benefits segment benefited from medical costs falling to 87.3% of premiums, down from 90.4% a year ago. The cost-efficiency reflected better underlying performance in Medicare and the impact of improved Medicare Advantage star ratings for the 2025 payment year. That was partly offset by a $448 million premium deficiency for individual exchange coverage. CVS said it will exit its Aetna individual market plans for 2026.
CVS Earnings
The Woonsocket, R.I., company posted adjusted EPS of $2.25, up 72% from a year ago and 58 cents above estimates. Revenue grew 7% to $94.59 billion, topping views by $1.2 billion.
CVS raised its full-year adjusted earnings per share outlook to a range of $6 to $6.20 from the prior range of $5.75 to $6. The company expects to generate $7 billion in cash flow from operations, up from prior guidance of $6.5 billion. In Q1, CVS generated $4.6 billion in cash from operations, indicating a tougher operating environment in the year's final three quarters.
The earnings release notes that CVS is "maintaining a cautious view for the remainder of the year in light of continued elevated cost trends and the potential for macro headwinds."
CVS-Novo Nordisk Deal
CVS Caremark, the prescription benefits management arm, is partnering with Novo "to significantly increase access to Wegovy" for plan members at a more affordable price, effective July 1. CVS hopes its position as the first retail pharmacy in the NovoCare pharmacy network will drive increased usage of its 9,000 community health locations.
Earlier this week, Novo said it was working with Hims & Hers Health to expand access to 2.4 mg Wegovy injections. The announcement helped send HIMS stock up 23%.
CVS, NVO
CVS stock rose more than 5% to above 70 in early trade, placing it among the top S&P 500 performers. NVO climbed 3.8% to 69.
Today's move is set to lift CVS to a 52-week high. CVS stock rose 2.6% on Wednesday to close just above its 50-day moving average. Thursday's convincing move above the 50-day line, while breaking the downtrend from its recent high of 71.45, is flashing an early entry opportunity.
However, moves approaching 10% above the 50-day line suggest establishing smaller positions. Further, keep in mind that CVS has a 21-day average true range of 3.9%, and NVO has an ATR of 4.6%.
There are exceptions, but given current market conditions, IBD generally suggests investors keep most of their portfolio focused on stocks with ATRs at or below 6%.
Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.
