CVS Health Post-Q4 Earnings: Is the Stock Worth Buying Now?

Core Viewpoint - CVS Health has reported better-than-expected fourth-quarter 2024 results and provided an optimistic outlook for 2025, despite facing challenges in the healthcare spending landscape and regulatory pressures [1][20]. Financial Performance - For Q4 2024, CVS Health reported total revenues of $97.71 billion, a 4$1.19, reflecting a significant year-over-year decline of 43.9% [5]. - The Health Services segment experienced a 4% year-over-year decline, primarily due to the loss of a large client and ongoing pharmacy client price improvements [6]. - The Pharmacy and Consumer Wellness segment generated revenues exceeding $33 billion, marking a 7$33 billion, although it posted an adjusted operating loss of $439 million due to a high medical benefit ratio of 94.8$5.75 and $6.00 for 2025, compared to$5.42 in 2024, indicating expectations of recovery in the Aetna business and continued growth in Health Services [10]. - The company anticipates a decline of over 1 million members in its healthcare benefits segment, but growth in the commercial self-insured business is expected to partially offset this [11]. - CVS expects its health services segment to grow by 4%, driven by Caremark [12]. Stock Performance - CVS Health's stock has surged 26.6% in a month, significantly outperforming the S&P 500's 1.9% gain and its direct competitors [2]. - Earnings estimates for Q1 2025 have increased by 7% to $1.52 per share, with multiple upward revisions [13]. Industry Context - The retail pharmacy industry is facing significant pressure from non-reimbursable pharmacy expenses, leading to reduced demand for prescription and over-the-counter drugs [17]. - CVS Health's forward 12-month price-to-earnings (P/E) ratio is 11.02X, which is a premium compared to its competitors, indicating that investors may be paying a higher price relative to expected earnings growth [18].