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The stock market kicked off 2025 on a strong note, but the rally quickly lost steam as escalating tariff tensions hammered investor sentiment. The S&P 500 Index ($SPX) slipped into negative territory this year, raising fears of further declines. Even last year’s artificial intelligence (AI)-fueled tech darlings aren’t safe, with broader market headwinds weighing heavily on the sector.
However, interestingly, in the midst of this turmoil, an unexpected healthcare player is defying the odds. CVS Health (CVS) has emerged as the best-performing stock in the S&P 500 this year despite being in the red just a year ago. The company was a market laggard in 2024, plagued by missing earnings expectations and struggling to win over investors. But everything changed in October when David Joyner stepped in as CEO, replacing Karen Lynch.
The new CEO’s arrival sparked fresh optimism, giving the stock a much-needed boost. Investor confidence soared further after CVS delivered a blowout year-end earnings report last month, backed by strategic initiatives aimed at boosting operational efficiency and cutting costs. With its fundamentals strengthening and Wall Street taking notice, is CVS stock now worth grabbing?
About CVS Health Stock
Rhode Island-based CVS Health (CVS) stands out as a major force in the healthcare landscape, offering a broad range of services through its retail pharmacies, clinics, and pharmacy benefit management operations. The company plays a vital role in helping people manage chronic conditions, adhere to medications, and access affordable health services. As of Sept. 30, 2024, CVS Health boasted a sprawling healthcare network with over 9,000 retail locations, 900-plus walk-in medical clinics, and 225-plus primary care centers.
Valued at roughly $84.5 billion by market cap, shares of this healthcare solutions provider have tanked almost 13% over the past year. However, the company has staged a stunning comeback this year, defying the broader market slump. So far in 2025, shares of CVS have skyrocketed 52%, massively outperforming the broader market’s 2% decline on a YTD basis.
Apart from its impressive rally, the company has also rewarded investors with dividends. On Feb. 3, the company paid its shareholders a quarterly dividend of $0.665 per share. On an annualized basis, CVS Health dishes out $2.66 per share, offering an enticing 3.9% yield. With a healthy payout ratio of 48.89%, the company is rewarding shareholders while retaining enough capital to fuel its growth ambitions.
Adding to its appeal, when it comes to valuation, the stock is trading at a compelling discount. CVS is priced at just 11.67 times forward earnings and 0.23 times sales, well below its sector averages of 17.42x and 3.51x, respectively.
CVS Health Tops Q4 Estimates
Shares of CVS closed up almost 15% on Feb. 12, triggered by a strong 2024 fourth-quarter earnings report, even as its troubled insurance business saw higher medical costs. The company booked sales of $97.7 billion for the final quarter of 2024, reflecting a 4.2% rise from the same period last year thanks to growth in its pharmacy business and insurance unit. The reported figure also surpassed Wall Street’s forecast of $96.9 billion.
Although adjusted EPS of $1.19 took a 43.9% year-over-year hit, primarily due to a decline in the Health Care Benefits segment’s operating results, it still handily beat analyst expectations by an impressive 33.7% margin. Reflecting on the Q4 performance, CEO David Joyner highlighted the company’s ability to deliver a streamlined, connected healthcare experience that saves time, cuts costs, and drives better health outcomes.
The CEO also acknowledged that while the company continues to face industry-wide challenges in its Health Care Benefits segment, its pharmacy and consumer wellness division is showing solid growth. Looking forward to fiscal 2025, management anticipates GAAP EPS to range between $4.58 and $4.83, while non-GAAP EPS is forecast to land between $5.75 and $6.00.
Additionally, CVS anticipates generating approximately $6.5 billion in cash flow from operations, highlighting its strong financial footing heading into the year. On the other hand, analysts tracking CVS Health project the company’s profit to climb 8.5% year over year to $5.88 per share in fiscal 2025 and grow another 15.7% to $6.80 per share in fiscal 2026.
What Do Analysts Expect for CVS Health Stock?
Wall Street’s confidence in CVS is running high, with the stock securing a consensus “Strong Buy” rating overall. Of the 23 analysts offering recommendations, 17 back it with “Strong Buy,” two give a “Moderate Buy,” and the remaining four maintain “Hold.” While the average analyst price target of $72.23 indicates only 6.4% potential upside from the current price levels, the Street-high price target of $81 suggests that CVS could rally as much as 19.3% from here.
