CVS Health plans to split into two publicly traded companies by the first half of 2028, according to CNBC. One company would hold the pharmacy business, including roughly 9,000 retail locations. The other would hold the insurance business, Aetna, and the pharmacy benefit manager, Caremark.
CVS CEO David Joyner told CNBC's "Squawk on the Street" that in 2024 the company was "in a turnaround" without the flexibility, cash or performance to execute a split. He told analysts on a call that the decision comes "out of strength." CVS has posted eight consecutive quarters of beating Wall Street earnings estimates, and it expects at least $15.5 billion in operating cash flow in 2026, up from $9.1 billion in 2024, according to the report.
Analysts quoted in the report say the retail pharmacy has become more consistently profitable. Brian Tanquilut of Jefferies said that in the past, "the idea of retail standing alone was unthinkable." Michael Cherny of Leerink Partners said the pharmacy "is a much different business" than it was years ago. The report notes that CVS's retail pharmacy segment still has adjusted operating margins of roughly 4% to 5%.
Wall Street reacted negatively. CVS shares fell about 12% on the announcement, according to the report.
Joyner told the Wall Street Journal that regulatory issues did not drive the split. CVS has said the separation follows a strategic review meant to give each business more focus and flexibility. The report also notes that Tennessee and Arkansas have passed laws that would bar one company from owning both a pharmacy and a PBM, though the Arkansas measure has been held up in court.