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

CVS Health's Health Services segment saw an 8% year-over-year revenue increase to over $43 billion, driven by specialty pharmacy growth; Caremark will list Wegovy as a preferred GLP-1 drug, expanding access via CVS retail pharmacies. Despite a $247 million loss from exiting ACO REACH and MSSP, analysts remain bullish, projecting a 4.6% revenue increase for the segment in 2025, and CVS shares have surged 49.4% year-to-date.

Analysis

CVS Health's (CVS) Health Services segment is demonstrating robust growth, with revenues increasing 8% year-over-year to over $43 billion in its last reported quarter, primarily driven by strength in specialty pharmacy, favorable pricing on branded medications, and pharmacy drug mix, though partially offset by price improvements for pharmacy clients. Key strategic initiatives include CVS Caremark listing Novo Nordisk's Wegovy as a preferred GLP-1 drug starting July 1 and expanding its access through 9,000 CVS retail pharmacies, a strategy that echoes the successful market leadership achieved with its Cordavis subsidiary's low-cost Humira biosimilar. Despite a $247 million loss reported for Q1 2025 from exiting the ACO REACH program and divesting its MSSP business, alongside ongoing concerns about elevated Medicare Advantage utilization impacting Oak Street Health, analysts project a 4.6% increase in Health Services revenues over 2024. The company's stock reflects this positive outlook, having surged 49.4% year-to-date against a 0.2% industry decline, and it currently trades at an attractive forward 12-month price-to-sales ratio of 0.22X—considerably below the industry average of 0.41X—further supported by a Value Score of A and upward trending 2025 earnings estimates.

Key Decisions for Investors

• Consider the Health Services segment's robust 8% YoY revenue growth and strategic initiatives, such as the Wegovy partnership and successful biosimilar strategy, as key positive indicators for CVS's future earnings potential.
• Evaluate CVS's current attractive valuation, with a forward price-to-sales ratio of 0.22X compared to the 0.41X industry average, and its strong year-to-date stock performance of +49.4%, while contextualizing the $247 million Q1 loss from program exits as a likely non-recurring charge.
• Monitor the impact of Medicare Advantage utilization on Oak Street Health's performance and the evolving competitive dynamics within Pharmacy Benefit Management, particularly concerning GLP-1 formulary placements and biosimilar market share, to assess the sustainability of the Health Services segment's growth trajectory.