CVS Health Gains Momentum After Q4 Performance, Analyst Upgrades Stock

Core Insights - CVS Health Corp reported fourth-quarter sales of $97.71 billion, exceeding the consensus estimate of$97.19 billion, with total revenues increasing by 4.2% driven by growth in Health Care Benefits and Pharmacy & Consumer Wellness segments, partially offset by a decline in Health Services segment [1] Financial Performance - The Medical benefit ratio increased from 88.5% to 94.8% year-over-year due to increased utilization, a decline in Medicare Advantage star ratings, and higher acuity in Medicaid [2] - Revenue projections for Health Services and Pharmacy & Consumer exceeded expectations, while the Health Care Benefits segment fell short due to lower-than-expected membership growth [3] Margin Expectations - CVS expects Medicare Advantage margins to improve from negative 4.5% to 5.0% in 2024, with a long-term goal of achieving a 3% to 5% margin [4] - Health Care Benefits margins are projected to reach 1.5% in 2025, significantly lower than previous years [4] Earnings Impact - Each percentage point of HCB margin improvement is estimated to add about $0.75 to adjusted EPS, implying a potential earnings boost of$3 to $4 if margins return to target levels [5] Future Projections - For 2025, revenue is projected to reach at least$134 billion, driven by slightly higher prescription volumes, with the company viewing 2025 as a transition year for CostVantage [6] - Analysts maintain a positive outlook, with CVS stock rising 5.77% to $66.97 following the earnings report [8] Analyst Ratings - Truist analyst maintains a Buy rating with an increased price forecast of$76, while other analysts have also raised their price targets for CVS Health [7][9]