CVS Health 2Q26 Beat Led by HCB Core Outperformance and Prior Year Favorability; Adj EPS Raised

Research evidence excerpt

J P M O R G A N

North America Equity Research

05 August 2026

CVS Health

2Q26 Beat Led by HCB Core Outperformance and Prior

Year Favorability; Adj EPS Raised

Overweight

CVS, CVS US

Price (04 Aug 26):$104.42

Managed Care and Facilities

CVS reported 2Q26 adj. EPS of $2.58, beating JPMe/consensus of $1.81/$1.85,

and raised its 2026 adj. EPS guidance to $7.90-$8.10 from $7.30-$7.50 previously

—above JPMe/median consensus of $7.39/$7.43, driven by an improved outlook

for HCB and PCW in particular. All three segments came in ahead of expectations,

with particular outperformance from HCB where CVS highlighted ~$500M of

favorability from PYD (inclusive of ACA Exchange risk adjustment) as well as

core outperformance, primarily in Medicare. Even excluding this ~$500M callout, HCB would still have comfortably outperformed consensus. While some

factors will be adjusted out of investors' run-rate (e.g., the 2025 ACA Exchange risk

adjustment), we still view the magnitude of the beat and raise as positive, with CVS

taking what we consider a conservative posture by assuming only a portion of the

first-half core outperformance in the updated HCB guidance. CVS also announced

a new GLP-1 relationship with Eli Lilly. We expect that much of the call will focus

on commentary regarding progression through 2026, including the relative

weighting of factors contributing to HCB performance and HSS cadence. We

highlight some of our key takeaways below:

Within the quarter, beat led by HCB on core outperformance and prior

year favorability; PCW and HSS also ahead of expectations. 2Q26

consolidated AOI was ~$5.16B, coming in well ahead of $3.86B/$3.93B

JPMe/consensus. HCB AOI was better than expected at $2.43B vs $1.4B/

$1.5B JPMe/consensus with an MBR of 87.4%, nearly ~200bps ahead of

89.8%/89.4% JPMe/consensus. Management cited $500M of favorability

from PYD (including ACA Exchange favorability, which CVS exited for

2026), as well as continued pockets of core outperformance (primarily in

Medicare) as driving the outperformance. We expect to hear more about the

relative contributions on the call and what is assumed in guidance going

forward.…