Is CVS Stock a Buy as Earnings Improve but Key Risks Remain Elevated?

CVS Health CVS is entering the second half of 2026 with stronger earnings momentum, higher cash generation and an improved Aetna profit outlook. Those gains strengthen the recovery case after a difficult period for the insurer.

The trade-off is that medical-cost pressure and changing pharmacy benefit manager economics remain unresolved. CVS trades below major valuation benchmarks, but its multiple is already above its own five-year median.

CVS Earnings Recovery Is Gaining Traction

The Zacks Consensus Estimate for 2026 earnings has increased 7.9% over the prior four weeks, while projected 2026 EPS growth stands at 16.6%. Current cash flow growth of 65.3% adds another positive signal.

Second-quarter results support that trend. Adjusted EPS increased 42.5% year over year to $2.58, while adjusted operating income rose 35.4% to $5.16 billion. CVS also raised 2026 adjusted EPS guidance to $7.90-$8.10.

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CVS Valuation Looks Low Versus Key Benchmarks

CVS trades at 11.7X forward 12-month earnings, below the Zacks sub-industry's 16.2X and the S&P 500's 20.8X. The gap shows that investors still assign CVS a sizable discount despite improving earnings.

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The stock is less cheap against its own history. CVS' five-year median forward multiple is 10.3X, below the current level. Relative valuation is favorable, but the shares are not unusually inexpensive compared with their historical norm.

CVS Aetna Recovery Strengthens the Bull Case

Health Care Benefits is the clearest operating reason for greater confidence. Adjusted operating income increased by more than $2 billion year over year in the first half of 2026 as pricing discipline and medical-cost management improved profitability.

CVS raised the segment's 2026 adjusted operating income outlook to $5.03-$5.37 billion, more than $1 billion above prior guidance. The medical benefit ratio improved to 87.4% in the second quarter from 89.9% a year earlier, showing measurable progress in the margin-recovery plan.

CVS PBM and Medical Risks Limit the Upside

The recovery still faces pressure from elevated medical utilization and reimbursement changes. CVS continues to take a prudent view of second-half medical costs, while retail pharmacy and pharmacy services face reimbursement and client-pricing pressure.

Caremark adds uncertainty. Weaker 340B conditions are expected to create a 2027 earnings headwind, while management anticipates lower pharmacy benefit manager membership next year. Specialty pharmacy and generic opportunities may offset part of that pressure, but uneven earnings remain possible.

The Cigna Group CI is relevant because its Evernorth Health Services business includes pharmacy benefit and related health-service operations. Cigna therefore offers another diversified model exposed to benefit-management economics.

UnitedHealth Group UNH combines a large insurance franchise with health-services operations through Optum. It provides another useful reference point for investors assessing medical-cost and health-services trends across managed care.

CVS Signals Point to a Balanced Setup

The bottom line is that CVS has better earnings momentum and a favorable relative valuation, but execution risk remains. Aetna is improving, while medical utilization, reimbursement pressure and Caremark's 2027 reset argue for more evidence that the gains can persist.

CVS currently carries a Zacks Rank #3 (Hold), which fits that mixed setup rather than signaling an aggressive entry point. The stock also has a Value Score of A, Growth Score of A, Momentum Score of A and VGM Score of A. Those scores indicate favorable characteristics across several styles, but they are designed to complement the Zacks Rank.

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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