Key Points
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It has added considerably to the company's fundamentals.
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Zooming out, CVS has crushed analyst profitability estimates lately.
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It has also raised its 2026 guidance twice now in a row.
- 10 stocks we like better than CVS Health ›
One of the hotter stocks in big healthcare just now is pharmacy chain mainstay CVS Health (NYSE: CVS). The company's shares have raced more than 18% higher year to date, comparing favorably to the benchmark S&P 500 index's sub-13% rise.
And, according to most analysts tracking the stock, the stock's not done yet. According to data compiled by TipRanks, the consensus pundit price target is $114.59 per share, which is 22% above its most recent closing level.
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Let's open the doors of this busy pharmacy to determine how it got here, and whether it can indeed continue to move higher.
Beating analysts' earning estimates
Any company that delivers two estimates-crushing quarters in a row is going to be a juicy buy candidate for investors. In all three of the quarterly earnings reports that CVS published this calendar year, it topped consensus analyst estimates for revenue and profitability. Investors are more impressed by the latter, naturally, so the company looked particularly good with its convincing beats in both the first and second frames.
First-quarter net income not under generally accepted accounting principles (non-GAAP, or adjusted) came in at $2.57 per share against the analyst consensus of $2.21. The gap for the following reporting period was much wider, at $2.58 and $1.83, respectively. Better -- since stocks trade on future potential instead of trailing performance -- CVS raised both its top- and bottom-line guidance in each of those two quarters.
What's going right for CVS? A major factor is its healthcare benefits segment, anchored by giant insurer Aetna, which saw a sharp drop in its medical benefit ratio (MBR) in the first quarter. The MBR is a key metric in the health insurance field, as it measures the percentage of collected premiums that are paid out for claims (so a lower figure is better for CVS).
The company's fourth quarter of 2025 MBR was 94.8%, then swooned to 84.6% before increasing modestly to 87.4% in the two subsequent periods. Keeping more premium money positively affected profitability: Adjusted operating income for healthcare benefits rose 52% year over year in the first quarter to over $3 billion, and 85% in the second quarter to $2.4 billion.
Big bunch of buy recommendations
In the analyst pen, the bulls are running wild for CVS. The TipRanks page on the company shows that 16 of the 17 prognosticators it tracks rate the stock a buy. One CVS optimist is UBS' Kevin Caliendo, who raised his price target (to $126 per share from $122) and maintained a buy recommendation after that second-quarter report.
While he acknowledged that the company was facing challenges, including operational missteps at its CVS Caremark pharmacy benefits manager (PBM), he was bullish about the vast improvements in healthcare benefits. He also noted that, in his estimation, the prospects for CVS' pharmacy and consumer wellness segment -- its retail business -- are growing.
Though 22% might sound like an ambitious price-target growth forecast for the stock of a large, sprawling, and well-established company, CVS' insurance operations are going gangbusters, and the company is selling into an American population that's getting proportionally older (and therefore requiring more of what it sells). Personally, I think CVS stock could rise past that level.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.