CVS Health Swings To Q3 Profit, Lifts FY26 Outlook; To Split Into Two; Shares Drop

(RTTNews) - CVS Health Corp. reported Wednesday a profit in its third quarter, compared to prior year's loss, mainly on the absence of prior year's $5.7 billion goodwill impairment charge, and higher revenues.

Further, the firm raised fiscal 2026 outlook to reflect increases in the Health Care Benefits and Pharmacy & Consumer Wellness segments.

Separately, CVS Health announced its plan to separate into two independent publicly traded companies, a move aimed at creating more focused businesses across healthcare services and retail pharmacy operations.

In pre-market activity on the NYSE, the shares were trading 3.18 percent lower at $88.56.

Planned Separation

Regarding the planned breakup, CVS said it will be divided into a healthcare solutions business and a retail pharmacy company. The move is expected to be completed in the first half of 2028 by means of a separation that is intended to be tax-free. Upon completion, existing shareholders are expected to own shares in both companies.

The healthcare solutions company, which will be referred to as CVS Health in the interim, will comprise Aetna, CVS Caremark, CVS Specialty, Oak Street Health and Signify Health.

Further, the national retail pharmacy and community healthcare company, comprising approximately 9,000 CVS pharmacies, mail pharmacy, MinuteClinic (including virtual care), and the Health100 technology services business, will be named CVS Pharmacy.

Upon separation, David Joyner, currently Chairman and CEO of CVS Health, will be the Chairman and CEO of the healthcare solutions company. Prem Shah, currently Group President of CVS Health, will be the CEO of CVS Pharmacy.

CVS said the separation is intended to give each company greater strategic focus, financial flexibility and operational agility, while continuing efforts to improve healthcare affordability, access and patient experience.

Both companies are expected to maintain investment-grade balance sheets, generate strong cash flow and pay dividends following the separation.

The company said it will continue to operate as at present and deliver against its financial targets, until the separation is completed.

The decision follows a strategic review by the board and comes as CVS continues to expand its healthcare services platform while maintaining one of the largest retail pharmacy networks in the United States.

Outlook

Looking ahead for fiscal 2026, CVS Health now expects net income attributable of $9.002 billion or at least $6.98 per share, compared to a previous range of $6.84 to $7.04.

Adjusted income attributable to CVS Health is now expected to be $10.571 billion or at least $8.20 per share, higher than a range of $7.90 to $8.10 expected earlier.

In fiscal 2025, earnings on a reported basis were $1.39 per share and adjusted basis were $6.75 per share.

Revenue is now projected to be at least $420.0 billion, compared to previous projection of at least $414.0 billion.

Cash flow from operations guidance has been increased to at least $15.5 billion from previous view of at least $11.5 billion.

The company maintained a cautious view for the remainder of the year in light of continued elevated cost trends and the potential for macro headwinds.

Q3 Results

In the third quarter, net income attributable to CVS Health was $2.172 billion, compared to prior year's loss of $3.975 billion. Earnings per share were $1.68, compared to loss of $3.13 last year.

The improved result reflects the absence of a $5.7 billion goodwill impairment charge related to the Health Care Delivery reporting unit recorded in the third quarter of 2025.

Adjusted earnings per share were $2.09, compared to $1.60 in the prior year, primarily due to improved adjusted operating income in the Health Care Benefits segment, reflecting continued execution of its margin recovery plan.

Adjusted operating income increased 21.2 percent primarily driven by increases across all operating segments.

Third-quarter total revenues increased 5.4 percent to $108.399 billion from $102.871 billion a year ago, primarily driven by growth in the Health Services and Health Care Benefits segments.

Total Health Care Benefits segment revenues increased 2.4 percent, primarily driven by an increase in the Government business.

Total Health Services segment revenues grew 9.5 percent mainly on pharmacy drug mix and brand inflation, partially offset by continued pharmacy client price improvements.

Meanwhile, total Pharmacy & Consumer Wellness segment revenues decreased 2.0 percent primarily due to regulatory-related price reductions on certain drugs.

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