CVS Health upgraded at TD Cowen after insurer unveils 2025 Medicare Advantage plan

Investing.com — Analysts at TD Cowen have raised their rating of CVS Health (NYSE:) to “Buy” from “Hold”, citing changes to its 2025 Medicare Advantage plan benefits announced earlier this week.

Along with peers like Humana (NYSE:) and Cigna (NYSE:), CVS unveiled details of its government-backed health insurance plans for next year for people aged 65 and older on Tuesday, prior to the start of enrollment for Medicare Advantage benefits later this month.

The US government pays private insurers like CVS a set rate to manage so-called Medicare Advantage plans, which offer older people extra benefits not typically included in regular government coverage.

According to the Centers for Medicare and Medicaid Services (CMS), Medicare Advantage plan enrollment is forecast to expand to 35.7 million people in 2025.

In a note to clients, the TD Cowen analysts said CVS’s latest Medicare Advantage plan included “meaningful” reductions in benefits for purchasing over-the-counter medications and smaller allowances for dental coverage.

CVS is also likely to see an increase in the amount of people who signed up for its highly-rated 4-star plans to 90% next year, up from 73% in 2024. The star ratings are a measure of the performance of health and prescription drug plans which are carried out by the CMS.

“This gives us greater conviction that 2024 represents a floor for shares, as well as great confidence in CVS’s ability to see [double-digit] adj[usted] [earnings per share] growth in [2025] […] and beyond,” the TD Cowen analysts wrote.

Shares in Rhode Island-based CVS Health were slightly higher in premarket US trading on Friday. They have slumped by more than 22% so far this year, echoing recent investor concerns over its performance.

Previous media reports have suggested that CVS is mulling several options to overhaul the business, including a break-up of its retail and insurance divisions.

On Tuesday, the company announced that it would lay off around 2,900 workers, or just under 1% of its headcount, as part of a drive to bring down expenses. Most of the impacted roles would be in its corporate operations and not in its ubiquitous stores and pharmacies, CVS said.