Exploring CVS' Health Services Segment: A Key Growth Engine for 2025?

Healthcare conglomerate CVS Health CVS formed its Health Services segment through a realignment tied to a new operating model adopted in early 2023. In its last reported quarter, the segment contributed more than $43 billion in revenues — up 8% year over year — driven by growth in specialty pharmacy, higher pricing of branded medications and pharmacy drug mix. However, these gains were partially offset by ongoing price improvements extended to pharmacy clients.

The segment includes CVS Caremark, one of the leading pharmacy benefit managers (PBM) in the United States, which helps curb drug spend through its solutions without compromising quality care. Starting July 1, Caremark will list Novo Nordisk’s NVO Wegovy as the preferred GLP-1 medicine on its largest commercial template formularies. The Novo Nordisk partnership echoes CVS’ launch of a low-cost Humira biosimilar via its Cordavis subsidiary, which now leads the U.S. market. CVS will also serve as the first retail pharmacy in NVO’s NovoCare pharmacy network, increasing Wegovy’s access at 9,000 community health locations.

In the first quarter of 2025, CVS Health processed more than $464 million of pharmacy claims on a 30-day equivalent basis, with membership reaching almost 88 million as of March-end. In the healthcare delivery business, growth continues to be led by the performance of Oak Street and Signify Health assets. Still, persistently elevated Medicare Advantage remains a concern for Oak Street Health’s growth.

Meanwhile, CVS exited the Accountable Care Organization Realizing Equity, Access and Community Health (“ACO REACH”) program and sold its Medicare Shared Savings Program (“MSSP”) business to Wellvana Health, incurring a combined loss of $247 million in the first quarter. Still, analysts continue to remain bullish on the segment, with the Zacks Consensus Estimate indicating a 4.6% increase in Health Services revenues over 2024.

What About CVS’ Peers?

The Cigna Group CI is gaining from the strength of its Evernorth Health Services portfolio.  Within this, CI reported 14% year-over-year growth in Pharmacy Benefit Services in the first quarter of 2025, mainly from existing client relationships and new businesses. Strong specialty volume growth in Cigna’s Specialty and Care Services drove an 18.9% improvement. Organic growth in specialty businesses was supported by higher Humira biosimilar adoption.

At Humana HUM, the CenterWell segment, which includes the company’s pharmacy, primary care and home solutions operations, reported a 37.5% increase in service revenues in the first quarter of 2025. Humana reduced operating costs in this segment owing to its value creation initiatives and also benefited from more favorable operating trends in the primary care business. Still, HUM saw some of the improvement being offset by the impact of the v28 risk model revision.

CVS’ Price Performance, Valuation and Estimates

Year to date, CVS Health shares have surged 49.4% against the industry’s 0.2% dip.

In terms of valuation, CVS is trading at a forward 12-month price-to-sales of 0.22X compared to the industry average of 0.41X. The stock’s Value Score of A further adds to its appeal.

Consensus estimates for CVS Health’s 2025 earnings have been trending upward over the past 90 days.

CVS stock currently carries a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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