CVS raises its 2025 guidance despite goodwill impairment charges on health care offering
CVS raises its 2025 guidance despite goodwill impairment charges on health care offering
By Emily Olsen | Published: 2025-10-29 14:32:00 | Source: Healthcare Dive – Latest News
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Diving brief:
- CVS Health raised its 2025 earnings forecast after health care giant Aetna’s health insurance and pharmacy units improved their third-quarter performance.
- CVS It now expects a full-year adjustment ProfitsBetween $6.55 to $6.65 per share, up from the previous guide of $6.30 to $6.40 per share, according to financial results released Wednesday.
- However, the company swung to a loss in the third quarter, driven by a $5.7 billion goodwill impairment charge tied to CVS’ health care delivery assets — and particularly its move to slow the growth of Oak Street Health’s senior care clinics, CEO David Joyner said on an earnings call Wednesday morning.
Diving vision:Â
CVS beat Wall Street expectations for earnings and revenue in the third quarter, an overall “positive step” for the health care giant even as it faces headwinds, JPMorgan analyst Lisa Gill wrote in a note on Wednesday.
The company has been in the midst of Aetna’s turnaround efforts after the insurer faced a shaky 2024 due to rising medical spending in government programs.
CVS’s payer peers this year also struggled with increased medical costs in government programs such as Medicare Advantage, Medicaid and the Affordable Care Act exchanges. Insurers offering ACA plans also face significant policy uncertainty stemming from the potential expiration of more generous subsidies for low- and middle-income enrollees that are set to expire at the end of the year.
CVS is more insulated from the ACA’s woes, as the company plans to exit individual exchanges for 2026. Meanwhile, the healthcare giant is seeing improved performance across Aetna, prompting CVS to boost its 2025 earnings guidance.
Aetna Revenue of about $36 billion in the third quarter rose more than 9% year over year. The division generated $53 million in operating income in the third quarter, compared to a loss of $1.2 billion at the same time last year.
The healthcare giant said the improvement was driven by better performance in its government business.
The unit’s medical loss ratio — a key marker of patient care spending — fell to 92.8%, compared to 95.2% in the same quarter last year.
“We believe this momentum will continue not only into the fourth quarter, but also into 2026. So we will build on that momentum,” Aetna President Steve Nelson said during the call. “However, we clearly respect an uptrend environment, and this is the first year of a multi-year recovery.”
However, CVS’s health services segment, which includes massive pharmacy benefits manager Caremark and health care delivery assets, faced challenges in the quarter.
Despite revenue increasing nearly 12% year over year to $49.3 billion, the division posted an operating loss of $3.9 billion, down from income of $2.1 billion at the same time last year, due to impairment charges.
CVS said the delisting stems from a reduction in the number of new primary care clinics it plans to open starting next year. The company also expects that A number of Oak Street clinics have closed.
CVS decided to close underperforming clinics as the health care giant did not see a “reasonable path to achieving sustainable margins,” Chief Financial Officer Brian Newman said on the call.
On an adjusted basis – without write-offs – health services operating income continued to decline, from $2.2 billion to $2.1 billion on an annual basis.
However, the performance of its health care delivery business in the third quarter was in line with CVS’s expectations, according to Joyner.
“Despite this modernization, value-based care remains a critical component of our strategy,” he said. “The reasons for believing in this business have not changed, but the market is evolving, and we are adapting our strategy to bring financial performance in line with our expectations.”
Overall, CVS reported revenue of $102.9 billion in the quarter, up nearly 8% year over year and a record high for the company.
CVS reported a net loss of about $4 billion, compared with income of $71 million at the same time last year.
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