CVS Health Plans Split as Q3 Profit Rises, Raises 2026 Outlook

CVS Health Corp. (NYSE: CVS) plans to separate into two publicly traded companies, dividing its broader healthcare operations from its retail pharmacy and community healthcare business, as stronger third-quarter results prompted the company to raise its 2026 guidance.

The separation is expected to be completed in the first half of 2028, subject to final board approval, the effectiveness of a Form 10 filing and confirmation of the intended tax-free treatment. CVS Health shareholders would own shares in both companies.

The announcement came as CVS reported third-quarter revenue of $108.4 billion, up 5.4% from $102.9 billion a year earlier. Adjusted operating income increased to $4.19 billion from $3.46 billion, while adjusted earnings rose to $2.09 per share from $1.60. GAAP earnings were $1.68 per share, compared with a loss of $3.13 per share in the prior-year quarter.

Operating cash flow totaled approximately $4.7 billion for the quarter, up from $0.8 billion a year earlier, bringing the year-to-date figure to $15.3 billion. CVS said its stronger balance sheet and improved leverage position would allow it to resume a balanced capital deployment strategy, including planned share repurchases in the fourth quarter.

2026 Guidance Raised

CVS increased its full-year adjusted earnings guidance to at least $8.20 per share from a previous range of $7.90 to $8.10, reflecting higher expectations for the Health Care Benefits and Pharmacy and Consumer Wellness businesses.

The company now expects at least $420 billion in 2026 revenue, compared with its prior forecast of at least $414 billion. Adjusted operating income is projected to reach at least $17.05 billion, up from the previous range of $16.58 billion to $16.92 billion.

CVS also expects GAAP earnings of at least $6.98 per share and operating cash flow of at least $15.5 billion. The prior forecasts called for GAAP earnings of $6.84 to $7.04 per share and operating cash flow of at least $11.5 billion.

Health Benefits Leads Earnings Improvement

Health Care Benefits revenue rose to $36.9 billion from $36.0 billion, while adjusted operating income increased by nearly $600 million to $910 million. CVS attributed the improvement primarily to better underlying performance in its government business.

The segment’s medical benefit ratio declined to 91.3% from 92.8%, indicating that medical costs consumed a smaller share of premium revenue. The company said the ratio was better than expected, supported by medical cost management and disciplined pricing in Medicare. Medical membership declined to 26.1 million from 26.7 million.

CVS raised the segment’s 2026 adjusted operating income forecast to at least $5.40 billion from a previous range of $5.03 billion to $5.37 billion. It maintained an outlook of approximately 26 million members and expects the full-year medical benefit ratio to fall in the lower half of a range centered on 89.75%, plus or minus 25 basis points.

Health Services revenue increased to $54.0 billion from $49.3 billion. Adjusted operating income rose nearly 3% to $2.11 billion, driven by improved purchasing economics and pharmacy drug mix, partly offset by continued pharmacy client price improvements. Pharmacy claims processed increased to 481.7 million from 475.6 million.

CVS said performance in Pharmacy Services, including its 340B and rebate guarantee operations, remained in line with expectations. Health Care Delivery also performed as expected. The company reaffirmed the segment’s 2026 adjusted operating income guidance of at least $7.25 billion while increasing its revenue forecast to at least $206.6 billion from at least $203.6 billion.

Pharmacy and Consumer Wellness revenue declined to $35.5 billion from $36.2 billion, but adjusted operating income increased more than 10% to $1.64 billion. CVS cited strength in its core pharmacy operations and contributions from acquired Rite Aid assets, partially offset by continued business investment and consumer trends. Prescriptions filled rose to 470.0 million from 461.4 million.

A slower start to the immunization season was offset by core pharmacy strength, the company said. CVS raised the segment’s adjusted operating income forecast to at least $6.50 billion from at least $6.40 billion and increased its revenue outlook to at least $138 billion from at least $137.5 billion.

Separation to Create CVS Health and CVS Pharmacy

Following the planned separation, CVS Health would house the Health Care Benefits business, Pharmacy Services, Specialty Pharmacy, Oak Street Health and Signify Health. The company estimates the standalone healthcare solutions business would generate approximately $320 billion of full-year 2026 revenue. David Joyner is expected to remain chairman and chief executive.

The second company, CVS Pharmacy, would include community pharmacies, the omnichannel retail business, mail-order pharmacy, MinuteClinic and the Health100 consumer engagement platform. CVS estimates that business would generate approximately $145 billion in full-year 2026 revenue. Prem Shah is expected to serve as chief executive.

CVS said each company is expected to have an investment-grade credit profile, strong free cash flow and its own dividend policy. Management presented the separation as a way to simplify the corporate structure, create more focused strategic agendas and give each business greater flexibility over investment and capital allocation.

The transaction remains subject to significant uncertainty. CVS cautioned that the separation may not occur on the proposed terms or timetable and that required conditions, approvals or tax treatment may not be secured. The company also identified potential restructuring expenses, dis-synergy costs, execution challenges and the possibility that the anticipated benefits may not be realized.