CVS Surpasses Earnings Estimates Amid Challenges and Legal Issues

Washington, D.C. — CVS Pharmacy reported its first-quarter earnings on Thursday, surpassing estimates and raising its full-year guidance despite facing legal troubles and ongoing market pressures.

CVS shares rose 7% in premarket trading following the announcement. The company now expects adjusted earnings for the year to be between $6 and $6.20 per share, an increase from its previous guidance of $5.75 to $6 per share.

However, CVS revised its GAAP diluted EPS guidance lower due to charges from a recent legal ruling involving its pharmacy services subsidiary, Omnicare. A jury found Omnicare liable for improperly dispensing drugs to vulnerable populations, including the elderly and disabled. CVS intends to appeal this decision.

Despite these challenges, CVS is taking a cautious approach for the remainder of the year. The company acknowledged potential pressures from ongoing high medical costs and broader economic factors. “We got smarter about the markets that we wanted to compete for,” said CVS CEO David Joyner in an interview with CNBC. “So I think why you’re not seeing a surprise on our part is because we actually planned for elevated trends going into this year.”

Joyner is also mindful of proposed tariffs on pharmaceuticals imported into the U.S., stating, “On the pharmacy side, I think it is highly dependent on what happens in the next week or two when they announce the implications of tariffs on the manufacturers.” He emphasized that most retail products are sourced domestically, which could work to CVS’s advantage.

For the first quarter, CVS’s insurer Aetna observed a decline in its medical benefit ratio to 87.3% from 90.4% a year earlier, indicating stronger performance in the insurance unit. This improvement comes as more Medicare Advantage patients resume delayed hospital procedures due to the pandemic.

“I think that investment and talent that allowed us to focus on both the execution and the operation … actually helped establish the performance that you’re seeing,” Joyner remarked regarding a management reshuffle last year.

Under Joyner’s leadership, CVS reported a net income of $1.78 billion, or $1.41 per share, compared to $1.12 billion, or 88 cents per share, from the previous year. Excluding specific financial adjustments, adjusted earnings were $2.25 per share.

Sales reached $94.59 billion for the quarter, a 7% increase from a year ago, bolstered by growth across all three business segments. However, the retail pharmacy sector did not meet Wall Street expectations, facing challenges from reduced consumer spending and lower reimbursement rates for prescriptions.

Notably, CVS’s health services sector generated $43.46 billion in revenue, while the pharmacy and consumer wellness division reported $31.91 billion in sales, both surpassing prior year figures but falling short of analyst projections.

Additionally, CVS announced that Aetna will exit the Affordable Care Act marketplaces starting in the 2026 plan year, signaling a shift in strategy for its health insurance offerings.