CVS shares are up 45% this year — here's why it may be starting to turn its business around

Core Viewpoint - CVS Health is showing signs of recovery after a challenging 2024, with a significant increase in stock price and positive fourth-quarter earnings results, indicating potential for a turnaround in 2025 [1][2][3]. Financial Performance - CVS shares have risen over 45% in 2025, contrasting with competitors like Walgreens, which saw only a 3% increase [2]. - The company experienced a stock decline of more than 40% in 2024 due to missed earnings estimates and increased medical costs [3]. Earnings Outlook - CVS aims for adjusted earnings of $5.75 to$6 per share for 2025, with analysts expressing optimism about the company's ability to meet this target [4][5]. - The fourth-quarter results suggest that CVS may be moving past its operational challenges, although medical costs are expected to remain high in 2025 [3][12]. Insurance Business Adjustments - CVS is restructuring its insurance business, including exiting unprofitable health plans and increasing premiums to reduce membership [5][6]. - The company plans to decrease its Medicare Advantage membership by a "high single-digit percentage" in 2025, with a goal to improve margins from negative 4.5% to a target of 3% to 5% by 2027 [6][8]. Market Position and Strategy - CVS's unique business model, which integrates a health insurer, retail drugstore chain, and pharmacy benefit manager (PBM), provides a competitive advantage [16][18]. - The synergy between CVS's various business segments is expected to enhance its market position, particularly in the prescription market [17][19]. Regulatory Environment - The Biden administration proposed a 2.2% increase in Medicare Advantage reimbursement rates for 2026, which could positively impact CVS's financials [11]. - CVS is advocating for higher payment rates from the government to address rising medical costs [10].