CVS Health Upgraded by TD Cowen Following Insurer’s 2025 Medicare Advantage Plan Announcement

Analysts at TD Cowen have upgraded their rating of CVS Health to “Buy” from “Hold,” following the recent announcements regarding the company’s Medicare Advantage plan benefits for 2025.

CVS, alongside competitors like Humana and Cigna, revealed the details of its government-backed health insurance plans for the upcoming year, aimed at individuals aged 65 and older, earlier this week. This disclosure comes just before the enrollment period for Medicare Advantage benefits begins later this month.

The U.S. government reimburses private insurers, including CVS, with a fixed rate to administer Medicare Advantage plans, which offer additional benefits that aren’t typically included in standard government coverage.

According to the Centers for Medicare and Medicaid Services, enrollment in Medicare Advantage plans is expected to rise to 35.7 million in 2025.

In a report to clients, the TD Cowen analysts noted that CVS’s new Medicare Advantage plan features “meaningful” reductions in benefits related to over-the-counter medications and smaller allowances for dental coverage.

Additionally, CVS is projected to see an increase in the enrollment of its highly-rated 4-star plans, with participation expected to grow to 90% in the coming year, compared to 73% in 2024. These star ratings reflect the performance of health and prescription drug plans as assessed by the Centers for Medicare and Medicaid Services.

The analysts expressed confidence that 2024 represents a baseline for CVS shares and foresee robust potential for double-digit adjusted earnings per share growth in 2025 and beyond.

CVS Health’s shares showed a slight increase in premarket trading. However, the stock has dropped over 22% year-to-date, reflecting investor concerns regarding the company’s performance.

Earlier reports indicated that CVS is considering various strategies to revamp its business, including the possibility of separating its retail and insurance divisions.

Recently, the company announced plans to lay off approximately 2,900 employees, which is nearly 1% of its total workforce, as part of an initiative to reduce expenses. Most of the layoffs will affect corporate operations rather than the company’s widespread stores and pharmacies.