Key Points

CVS Health's financial results are improving due to several initiatives.
These efforts could continue to pay off in the short run.
CVS Health also has strong long-term prospects and a solid dividend program.

CVS Health (NYSE: CVS) faced notable difficulties following the pandemic. Revenue growth slowed while expenses climbed, pressuring profits and margins amid multiple hurdles. Yet the major pharmacy operator has been recovering steadily. The stock has advanced 48% over the past 12 months. The encouraging reality is that CVS Health's rebound may still be in early stages, leaving ample room for gains among investors who stay patient.

Understanding the recovery

CVS Health encountered several post-pandemic issues. Sales of pandemic-related items like diagnostic tests declined sharply. More critically, the firm dealt with higher utilization and expenses in its insurance segment, especially Medicare Advantage plans. Guidance was lowered multiple times amid this uncertainty. Over the past year, however, results have strengthened.

Improvement continued in the first quarter as revenue rose roughly 6% year over year to $100.4 billion. Adjusted earnings per share reached $2.57, climbing about 14% from the prior-year quarter. The company also raised its EPS outlook for fiscal 2026. Results topped estimates, marking another raise-and-beat quarter. Several factors explain the progress.

Two stand out. The medical benefit ratio fell to 84.6% in the first quarter, improving 2.7 percentage points from a year earlier. This ratio tracks the share of premium revenue spent on member healthcare costs; a lower figure supports stronger profits. CVS Health also boosted efficiency in its insurance operations by digitizing prior authorization. These and other steps have contained costs and lifted earnings.

Why the rebound has further to go

The full impact of CVS Health's initiatives has not yet appeared, and the company plans to expand efforts to strengthen operations. It intends to scale back its Medicare Advantage business this year. While that may trim overall revenue, the focus on profitable growth benefits investors. Long-term holders will also appreciate CVS Health's broader outlook.

Its large, diversified healthcare platform lets the company support patients across much of their care journey via primary care, insurance, pharmacy services and additional offerings. This integrated approach offers convenience by consolidating services under one organization rather than multiple providers.

The vertically integrated model further helps by delivering and financing care while steering patients toward lower-cost choices, trimming overall spending. CVS Health has built a trusted brand in healthcare that competitors struggle to match. These strengths position the company to capitalize on enduring trends such as population aging, which will increase healthcare demand and spending.

CVS Health also stands out as a reliable dividend payer. Payouts have grown 56.5% over the past decade, and the forward yield stands at 2.6%. Even after recent gains, the stock trades at an attractive 13.8 times forward earnings compared with the healthcare sector average of 17.4 times. CVS Health remains a compelling long-term holding.