- CVS stock is up 53% YTD.
- It is leading the S&P 500 by almost twice as much as the next best performers.
- Can the outperformance continue?
This stock is up 53% year-to-date, leading the large-cap benchmark by a wide margin.
The S&P 500 has been flipped upside down this year, with many of the top performers from the past two bull market years now struggling. Conversely, some beaten-down and forgotten value stocks have risen to the top.
In fact, the biggest winner on the S&P 500 this year, CVS Health (NYSE:CVS), has been one of the worst stocks over the past three years.
After three years of negative returns, including a 42% decline in 2024, CVS has stormed back in a big way in 2025. CVS stock has climbed roughly 53% year-to-date (YTD) to about $69 per share, far outpacing any other on the S&P 500. In fact, it is performing almost twice as well as the next best stocks on the S&P 500, gold producer Newmont Goldcorp (NYSE:NEM) and AI server maker Super Micro Computer (NASDAQ:SMCI), which are up 28% YTD.
What has driven the turnaround for CVS, and can it continue?
Too Cheap to Ignore
One of the key reasons for CVS’s resurgence this year is that investors just found it too cheap to ignore. After three terrible years, hurt by inflation and rising medical costs, CVS stock had plummeted to a dirt-cheap valuation, with a forward P/E of 7 at the end of 2024.
But there were other factors at play, starting with an improving economy and lower inflation rates. Also, one of its main competitors, Walgreens, announced that it was being acquired by Sycamore Partners and going private earlier this month.
Further, healthcare stocks, in general, are up as investors seek out more defensive plays in a difficult market environment. Healthcare stocks typically perform better during more challenging markets and slowing economies as an essential service. As of March 20, the healthcare sector was up 6.5%, making it the second-best performing sector on the S&P 500 behind energy.
Also, CVS has made some changes that have boosted investor confidence. For starters, it brought in David Joyner, the former head of CVS Caremark, as the new CEO last October. Joyner made a series of executive changes throughout the company and launched a restructuring plan to streamline and simplify the organization, improve efficiency, and reduce costs.
CVS beat earnings and revenue estimates in the fourth quarter. Joyner’s first at the helm, buy a sizable margin. The stock price spiked some 15% after the February 11 Q4 release. CVS also declared a 67 cents per share dividend in Q1, at a robust yield of 3.88%.
Can the Outperformance Continue?
CVS’s meteoric rise through the first three months of 2025 still doesn’t erase the steep losses from last year, as the stock is down 13% over the past 12 months. That means its still pretty cheap, with a P/E of 18, a forward P/E of 11, and a P/E-to Growth ratio of 0.71, which indicates its undervalued compared to its five-year earnings expectations.
Analysts are still fairly bullish on the stock, giving it a consensus buy rating and a price target of $73 per share – which would be another 8% increase over the current price.
And CVS’s outlook calls for strong earnings growth, amid the streamlining initiative. The company is calling for 2025 EPS of between $4.58 to $4.83, which would be 25% to 32% higher than 2024. The adjusted EPS guidance range is $5.75 to $6.00, which would be up 6% to 11% from 2024.
There are uncertainties around the impact of Trump administration policies, including tariffs. Also, if the administration reforms the federal pharmacy benefit manager (PBM) model, as Trump has indicated, that could potentially negatively impact CVS. However, there may also be some potential benefits for CVS if Trump introduces new insurance company pricing models.
Overall, CVS looks like it still has some room to run, but investors should be cautious and monitor inflation, the impact of tariffs, and Trump administration healthcare policies.