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Key Takeaways
- CVS Health shares fell 12% today after it said it will split into two public companies by the first half of 2028.
- The drop came despite a third-quarter beat and a first 2027 outlook of at least $8.65 of adjusted EPS.
- Cigna, the closest match for the new CVS Health, trades at 9.3x forward earnings, against about 18x for UnitedHealth.
- The breakup alone doesn’t unlock much value, so the case for CVS still rests on Aetna’s margin recovery.
CVS Health (CVS) shares sank 12% today after confirming it will split in two by the first half of 2028, separating Aetna, Caremark and its care businesses from roughly 9,000 CVS Pharmacy stores.
“We’re basically taking what I believe is one great company and making it two,” CEO David Joyner said. The Financial Times first reported the plan on Tuesday.
The bigger half will be priced against Cigna (CI), which pairs Express Scripts with an insurer and no stores, and UnitedHealth Group (UNH), which keeps its insurer and Optum under one roof.
The quarter was fine
The third-quarter results came out minutes earlier, and they beat: adjusted EPS of $2.09 against the $1.65 analysts expected. Management raised its 2026 outlook to at least $8.20 and gave a first 2027 view of at least $8.65.
Analysts had expected less for both years going into the report:
Most of the gain came from the insurance segment, whose adjusted operating income nearly tripled to $912 million.
The payoff is a long way off
The split unwinds the 2007 Caremark merger and the $69 billion Aetna deal of 2018, and it won’t close until the first half of 2028. Management said the cost is already in guidance and the dis-synergies can be managed.
But CVS wasn’t expensive going in. At Tuesday’s close, it traded at 11x forward earnings, near its 10x five-year average and well below July’s 15x high:
At today’s price, it’s closer to 10x.
TIKR tracks 27 analysts on CVS Health. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on CVS Health, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See CVS Health’s Analyst Ratings
Cigna’s multiple is the hurdle
Cigna, whose Express Scripts competes head-on with Caremark, trades at just 9.3x forward earnings. Adjusted pre-tax income in its drug-benefit business fell 27% in the second quarter on client contract renewals. Cigna reports this week, and if those margins are still shrinking, it’s hard to see investors paying the new CVS Health more.
UnitedHealth fetches about 18x. But medical costs took 88.4% of its premiums in the third quarter, against 91.3% in CVS’s insurance segment. Can the new CVS Health close that gap by 2028?
Where that leaves CVS
Frankly, the breakup doesn’t unlock much value by itself. The reason to own CVS is still Aetna’s margin recovery, and that’s running ahead of plan.
Of course, the SEC registration will show what each company earns and owes. Until then, investors are pricing two companies they can’t see yet.
So what is CVS Health stock actually worth?
TIKR lets you forecast the future price of any stock in less than a minute. Just enter a few assumptions into TIKR’s valuation model and see what CVS Health could be worth. Start from Wall Street consensus estimates, or adjust the inputs to reflect your own view of the business. It’s free to use.
Disclaimer:
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