CVS Health CVS reported its second-quarter 2026 results on Aug. 5. Revenues reached $106 billion, while adjusted operating income came in at approximately $5.2 billion, up more than 7% and 35%, respectively, from the prior-year quarter. The company saw growth across both the top and bottom lines in all of its operating segments. Adjusted earnings per share (EPS) improved significantly, increasing 40% year over year to $2.58.
CVS ended the quarter with approximately $2.7 billion of cash at the parent and unrestricted subsidiaries and a leverage ratio of roughly 3.5. Cumulative operating cash flow reached nearly $10.6 billion in the first half, reflecting strong earnings year to date and the impact of working capital improvements. Following the solid six-month performance, management raised its outlook for the full-year 2026 adjusted EPS and cash flow from operations.
The quarterly results, however, did not translate into a stronger stock performance. CVS shares ended the session 5.1% lower than the previous day’s close.
CVS Outpaces Key Benchmarks & Peers
Over the past 12 months, the stock has climbed 32.4% compared with the industry’s 9.6% growth, the Medical sector’s 10.2% increase and the S&P 500 composite’s 23.7% gain. The stock has also fared better than peers UnitedHealth Group UNH and Elevance Health ELV, which have risen 29.8% and 25.1%, respectively, over the same period.
CVS Stock’s 12-Month Price Performance
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CVS Health’s Q2 Results: Broad-Based Growth Across Segments
The Health Care Benefits revenues increased 3.5%, driven by strength in the Government business. This growth was partially offset by the company’s strategic exit from the individual exchange business this year, which brought total medical membership down by roughly 700,000 members compared to the prior-year period. CVS is seeing significant momentum in Aetna's margin recovery, with year-to-date adjusted operating income expanding by more than $2 billion, reflecting the cumulative impact of the actions taken over the past two years.
Medical benefit ratio was 87.4% compared to 89.9% in the prior year, with the impact of changes in our individual exchange risk adjustment position associated with the 2025 plan year as well as the impact of favorable prior-year development contributing roughly 140 basis points (bps).
In Health Services, the top line grew 11.5% year over year, led by pharmacy drug mix and brand inflation. However, continued pharmacy client price improvements remained a drag on growth. Adjusted operating income growth of 10% was primarily driven by improved purchasing economics and pharmacy drug mix and modest improvement in the health care delivery business, which rose 23%.
Pharmacy and Consumer Wellness revenues increased slightly in the quarter, driven by pharmacy drug mix, higher prescription volume, including contributions from the Rite Aid asset acquisitions, and brand inflation. Adjusted operating income grew 10%, primarily due to core pharmacy strength and incremental contributions from the Rite Aid transaction.
CVS Health Sets Higher 2026 Targets
CVS Health raised its full-year 2026 outlook across key financial metrics. The company now expects revenues of at least $414 billion, up from its previous forecast of at least $405 billion. Enterprise adjusted operating income is projected at $16.58 billion to $16.92 billion compared with the prior range of $15.53-$15.87 billion.
Within this outlook, Health Care Benefits adjusted operating income is now expected to reach $5.03 billion to $5.37 billion, more than $1 billion above the previous guidance. Adjusted EPS is now expected in the range of $7.90-$8.10 compared with the prior range of $7.30-$7.50.
CVS’ Earnings Revision Trend
The Zacks Consensus Estimate calls for the company’s EPS to increase 17.3% to $7.92 in 2026, followed by another 7% increase to $8.48 in 2027. The estimates have moved higher consistently over the past three months.
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A Look at CVS’ Valuation
CVS trades at a forward, five-year Price/Sales (P/S) of 0.28X, slightly above its historical median of 0.26X but well below the 0.52X industry average. It has a Value Score of A.
CVS Health’s 5-year P/S F12M
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By comparison, peers UnitedHealth Group and Elevance Health command higher valuations, trading at a P/S of 0.80X and 0.44X, respectively.
CVS Faces Near-Term Headwinds
In the second quarter, CVS Caremark’s 340B business faced some pressure. Restrictions imposed by pharma manufacturers on covered entities and some large specialty drugs turning generic weighed on the program. Though the impact was offset by strength in other parts of Caremark, management expects these pressures to persist and pose a headwind in 2027.
Caremark’s membership decline remains another challenge next year. The fall is expected to result from CVS’ transition to the lowest-net-cost pricing model and taking a more deliberate approach to client renewals and the selling season. Product actions and market exit by some of the company’s health plan customers will also likely play a role.
Medical cost utilization remains a key risk to Aetna’s recovery despite the improvement seen in the first half of 2026. Macroeconomic factors, including inflation, tariffs, interest rates, unemployment and supply-chain disruption, can affect costs, consumer behavior and cash flow across the enterprise.
Our Take on CVS Stock
CVS Health’s latest results show strength across key parts of the business and continued progress in Aetna’s margin recovery. Pharmacy & Consumer Wellness maintained solid momentum, while Health Services benefited from drug mix and brand inflation. Health Care Benefits also gained from strength in the Government business. The raised full-year guidance adds to the positive outlook.
At the same time, Caremark’s 340B pressures and expected membership declines remain notable near-term hurdles, while higher medical cost utilization could slow Aetna’s margin recovery.
The stock has outperformed its industry, sector and peers over the past 12 months. Valuation also remains attractive, with CVS trading at a lower sales multiple than its industry and peers. Given these factors, existing shareholders may want to retain their position. Prospective investors, however, should wait for a more favorable entry point.
CVS carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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