Have you ever watched a giant company stumble, then suddenly sprint ahead like it just chugged a triple espresso? That’s pretty much what happened with one of the biggest names in healthcare this morning. Their latest numbers didn’t just meet the mark—they vaulted over it, leaving analysts scrambling to update their models.
Picture this: a retail pharmacy chain that’s also an insurance powerhouse and a behind-the-scenes drug negotiator. Sounds complicated, right? Well, it is, but when all those pieces click together, the results can be stunning. And that’s exactly what unfolded in the third quarter of 2025.
A Turnaround Story in Full Swing
Let’s cut to the chase. The company we’re talking about delivered adjusted earnings of $1.60 per share. Sounds technical? It is, but here’s why it matters: experts were only expecting $1.37. That’s not just beating estimates—that’s crushing them by a wide margin.
Revenue? Try $102.87 billion. Yes, you read that right—over one hundred billion dollars in a single quarter. Wall Street thought they’d hit that milestone later, maybe in Q4. Nope. They got there early, with room to spare.
In my view, this isn’t just about numbers on a spreadsheet. It’s about momentum. After a rough patch that saw the stock lag and profits struggle, the new leadership seems to have found the right formula. Three straight quarters of beating expectations and raising guidance? That’s not luck. That’s execution.
The Insurance Unit: From Problem Child to Star Performer
Remember all the headlines about skyrocketing medical costs? Patients putting off surgeries during the pandemic, then flooding back all at once? That created a perfect storm for health insurers. Premiums couldn’t keep up with the surge in claims.
But something shifted this quarter. The key metric here is the medical benefit ratio—basically, how much of every premium dollar goes out the door to pay for care. Last year? 95.2%. This year? Down to 92.8%. Lower is better, and that drop signals serious improvement in profitability.
The recovery in our insurance operations has been nothing short of remarkable. We’ve seen favorable impacts from prior reserves and strong underlying performance in our government programs.
– Company leadership during earnings discussion
What drove this? A few things. First, those premium deficiency reserves from last year created a favorable comparison. Second, the government business—think Medicare Advantage and Part D—performed better than anyone anticipated. The Inflation Reduction Act played a role too, changing how drug benefits work under Medicare.
The insurance segment alone brought in $35.99 billion. That’s up over 9% from last year, and again, ahead of what analysts predicted. When your “problem” division becomes your growth engine, you know the strategy is working.
Retail Pharmacy: Still the Heart of the Operation
Walk into any of their 9,000-plus stores, and you’ll see why this division matters. This is where prescriptions get filled, flu shots administered, and over-the-counter remedies fly off shelves. In Q3, this unit generated $36.21 billion in sales—a hefty 11.7% jump year-over-year.
Sure, there are headwinds. Pharmacy reimbursement rates—how much insurers pay for drugs—continue to squeeze margins. But volume told a different story. Prescription counts rose, helped by acquisitions and organic growth. People need their meds, pandemic or not.
- Higher script volumes from store traffic and acquisitions
- Increased front-store sales in health and wellness categories
- Offsetting pressures from generic drug pricing and reimbursement
- Expansion of diagnostic testing and vaccination services
I’ve always believed the retail footprint gives this company a moat. Insurance can be copied, drug negotiation too, but thousands of convenient locations? That’s harder to replicate. And when those stores become health hubs—not just pill dispensaries—the value multiplies.
Behind the Scenes: The PBM Powerhouse
Ever wonder how insurance plans decide which drugs cost $10 and which cost $100? That’s the pharmacy benefit manager—or PBM—at work. This division negotiates with drug makers, builds formularies, and processes claims. It’s complex, controversial, and incredibly profitable when done right.
Leadership called it a “really good sales season.” Translation: they locked in major clients for 2026 and beyond. The health services segment, which includes the PBM, posted $49.27 billion in revenue—up 11.6% and well ahead of forecasts.
Why does this matter for investors? Recurring revenue. These contracts span years, creating predictable cash flows. In a volatile healthcare landscape, that stability is gold. Plus, scale matters—bigger client base means better negotiating leverage with pharmaceutical companies.
The $5.7 Billion Speed Bump
No earnings story is complete without some drama, right? Buried in the results was a massive $5.7 billion goodwill impairment charge. That’s accounting-speak for “we overpaid for something, and now we’re writing it down.”
The culprit? The health care delivery unit—think primary care clinics and related services. Growth slowed, some locations underperformed, and reality set in. The company decided to pump the brakes on clinic expansion and close 16 underperforming sites.
We’ve made the strategic decision to slow clinic growth and close locations that aren’t meeting expectations. This doesn’t change our commitment to value-based care—it’s about being smarter, not walking away.
Here’s where perspective matters. A $5.7 billion charge sounds catastrophic, but in context? The company generated over $100 billion in revenue. This was a course correction, not a collapse. Management reshuffled, refocused, and moved forward.
Interestingly, they emphasized that certain clinic brands are “performing according to plan.” So this isn’t abandoning primary care—it’s pruning the tree so stronger branches can grow. Smart businesses evolve, and this feels like evolution in action.
Guidance Hike: The Cherry on Top
Companies raise guidance when they’re confident. This one didn’t just nudge it up—they boosted adjusted earnings expectations to $6.55-$6.65 per share for 2025. That’s the third consecutive quarter of “beat and raise.”
Let’s break that down:
| Quarter | Action |
| Q1 2025 | Beat estimates, raised guidance |
| Q2 2025 | Beat estimates, raised guidance again |
| Q3 2025 | Beat estimates, third guidance increase |
Pattern recognition, anyone? Leadership expressed strong confidence in closing the year “favorably.” When a CEO says they’re “really, really good” about Q4, investors listen.
Leadership Transition: One Year In
This quarter marked a full year under new management. The previous regime struggled with profit growth and stock performance. The new team? Aggressive cost cuts, executive reshuffling, and a laser focus on operational efficiency.
Results speak louder than promises. Stock buybacks, debt management, and segment realignment all point to a disciplined approach. Perhaps most telling: employee morale seems improved, if earnings call tone is any indication.
In my experience covering corporate turnarounds, culture shifts precede financial shifts. The enthusiasm on that call felt genuine—not the scripted optimism you sometimes hear. Real change often starts at the top, and this feels real.
What Investors Should Watch Next
So where do we go from here? A few key areas:
- Insurance profitability sustainability—Can the medical benefit ratio stay in the low 90s?
- PBM contract retention—2026 sales season will be crucial
- Clinic strategy execution—Successful pruning without damaging core capabilities
- Macro healthcare trends—Election outcomes, drug pricing legislation
- Capital allocation—Dividends, buybacks, or reinvestment?
The healthcare sector never sleeps. Regulatory changes, demographic shifts, and technological disruption create constant pressure. But companies with scale, diversification, and adaptive leadership tend to thrive.
The Bigger Picture in Healthcare
Step back for a moment. This isn’t just about one company’s quarterly results. It’s a microcosm of broader trends reshaping American healthcare.
Consider the integration of services: retail + insurance + pharmacy benefits. That’s not coincidence—it’s strategy. Patients want convenience. Payers want cost control. Providers want predictable revenue. When one entity can deliver all three, magic happens.
Value-based care—the idea that providers get paid for outcomes, not volume—remains the holy grail. The clinic pullback doesn’t signal retreat; it signals realism. Not every location works. Not every model scales. Learning that quickly? That’s maturity.
Meanwhile, an aging population guarantees demand. Medicare Advantage enrollment keeps growing. Part D changes create both challenges and opportunities. Companies positioned at these intersections have structural advantages.
Risks That Still Linger
No analysis is complete without acknowledging risks. Pharmacy reimbursement pressure isn’t going away. Generic drug pricing deflation continues. Regulatory scrutiny of PBMs intensifies.
Then there’s competition. Amazon’s pushing into pharmacy. Walmart expands health services. Startups nibble at edges. Integration sounds great until execution falters—and execution is hard.
The goodwill charge reminds us: acquisitions carry risk. Overpaying for assets that underdeliver erodes value. Due diligence matters, and sometimes the market punishes even fixable mistakes.
Why This Matters for Your Portfolio
Healthcare stocks often trade at discounts to the broader market. Why? Complexity, regulation, and headline risk. But that complexity creates opportunity for those willing to dig in.
This company offers a dividend yield that’s attractive in a low-rate world. Earnings visibility improves with each quarter. The balance sheet, while leveraged, supports strategic flexibility.
Diversification across healthcare sub-sectors reduces single-point failure risk. Insurance offsets retail volatility. PBM recurring revenue smooths cycles. It’s not perfect, but it’s resilient.
Look, I’ve followed healthcare giants for years. Turnarounds rarely happen overnight, but when they do gain traction, the momentum can be powerful. Three quarters of outperformance suggests something sustainable is building.
The question now: can they maintain discipline while scaling improvements? Will insurance gains prove durable? Can clinic rationalization unlock value without alienating patients?
Early signs are encouraging. Leadership sounds focused, not complacent. Employees seem energized. Customers—well, they still need prescriptions filled and insurance coverage.
In a sector prone to surprises, this feels like a company that’s finally writing its own script instead of reacting to everyone else’s. And for investors patient enough to watch the story unfold, that could be very good news indeed.
The healthcare landscape evolves constantly, but some truths endure: scale matters, integration creates value, and execution separates winners from the pack. This quarter’s results check all those boxes.
Whether you’re a dividend investor seeking stability, a growth hunter betting on operational leverage, or a value seeker eyeing misunderstood complexity, this story warrants attention. The numbers don’t lie, and right now, they’re telling a compelling tale of recovery and potential.
