CVS Health (CVS +2.62%) is scheduled to report its fourth-quarter earnings pre-market on February 10th. While recent performance has consistently exceeded consensus estimates, a post-earnings rally is not necessarily assured. The forthcoming guidance for 2026, influenced by proposed adjustments to Medicare Advantage payment rates, presents a potential source of investor concern.
Earnings Preview: Q4 2025
Current sell-side consensus anticipates non-GAAP earnings of $0.99 per share for the fourth quarter, a moderate decrease from the $1.19 reported in Q4 2024. While an earnings beat remains a possibility, investor attention may be disproportionately focused on the forward-looking guidance. Specifically, the impact of revised Medicare Advantage rates—recently proposed at a 0.9% increase—will likely be scrutinized. UnitedHealth (UNH +2.89%), having already released an underwhelming outlook following the announcement of these rates, provides a cautionary precedent.
Despite a recent partial recovery from the initial market reaction to the Medicare Advantage news—which saw a decline exceeding 14%—further near-term volatility should not be dismissed. The market’s assessment of the impact of these rate adjustments may prove to be incomplete.
Long-Term Considerations: Beyond Near-Term Headwinds
While the market reaction to the Medicare Advantage adjustments has been pronounced, it is essential to consider the underlying fundamentals of CVS Health. The company’s business model exhibits a diversification that distinguishes it from peers, such as UnitedHealth. Aetna constitutes a smaller proportion of CVS’s overall revenue stream, with the retail pharmacy chain and pharmacy benefits management (PBM) units representing the primary drivers of earnings.
Consequently, the impact of the proposed Medicare Advantage rate adjustments may be comparatively less significant for CVS Health. This relative insulation extends to increased regulatory scrutiny, a factor that increasingly affects the healthcare sector.
The company’s ongoing efforts to optimize its pharmacy segment could further offset any potential headwinds in its insurance business. Current valuation metrics present an interesting contrast: CVS Health trades at less than 11 times forward earnings, a multiple significantly lower than UnitedHealth’s 16. This disparity suggests that greater skepticism is currently incorporated into CVS’s valuation, potentially creating an opportunity for positive surprise.
- Diversified Revenue Streams: Reduced reliance on insurance compared to peers.
- Valuation Discrepancy: Lower forward P/E ratio suggests greater potential for upside.
- Pharmacy Optimization: Ongoing efforts to improve performance in a core business segment.
While UnitedHealth’s valuation reflects elevated growth expectations, leaving it vulnerable to downward revisions, CVS Health’s comparatively conservative valuation may prove more resilient. Therefore, while caution is warranted in the short term, the long-term investment thesis for CVS Health remains intact. A “better than feared” earnings report, or even simply a measured assessment of the impact of the Medicare Advantage adjustments, could catalyze a positive market response.
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2026-02-08 01:12