CVS Puts Annual Cost of Lost Synergies After Separation at About $500 Million
Key Facts
CVS Health management estimated recurring costs from lost synergies after splitting the company into two entities at about $500 million annually, saying the figure is below some market forecasts that exceeded $1 billion. Management gave the estimate at the Wolfe Research conference on November 9, 2026, outlining the additional operating expenses associated with the two entities operating independently. The company said these recurring expenses differ from the costs of establishing an independent public company, which are one-time cash costs. At the conference, CEO David Joyner was asked whether those expenses would appear in reported earnings per share. He replied, "Correct, they will not be included in the numbers, so investors do not need to worry about their effect on earnings per share." The annual estimate puts the cost of continuing to run the two businesses separately at the heart of the deal’s assessment, while the one-time separation costs will not be charged to earnings per share, according to Joyner.
CVS says the separation will reshape its businesses into two companies with different business mixes. The Health Services company will include Aetna, CVS Caremark, CVS Specialty, Oak Street Health and Signify Health, while CVS Pharmacy will include about 9,000 pharmacies and stores, along with the mail-order pharmacy and MinuteClinic, including virtual care, and Health100’s technology services business. Joyner said management believes each company can grow faster when it operates independently. Under the split, the first entity will combine insurance, pharmacy benefit management and healthcare, while the second will focus on pharmacies and related services. CVS Health shareholders will own shares in both companies after the separation, under the company’s plan.
Management linked the separation to the growth trajectory of the pharmacy business. CVS Pharmacy’s future president, Prem Shah, said it had improved from previous guidance for a 5% decline to low-single-digit growth in the latest guidance. Shah said the company had moved "from a trajectory of a 5% decline to stability at the last investor day, and on the earnings call we guided to low-single-digit growth." The guidance for a decline dates back about 3 to 4 years, while the more recent guidance reflects the position management presented by the November 9, 2026 conference. The company says the pharmacy business will retain the benefits of generic drug purchasing through its more than 10-year relationship with Red Oak Sourcing. Caremark will also continue managing the costs of branded drugs within CVS Health, management said.
The separation plan follows third-quarter results that showed CVS revenue rising to $108.4 billion, compared with $102.9 billion in the same period of 2025. Adjusted earnings per share were $2.09, up from $1.60 a year earlier. In the Health Services segment, revenue rose 9.5% year over year, driven by drug mix and inflation in branded drug prices, while adjusted operating income rose 2.7%. Revenue in the Pharmacy and Wellness segment fell 2.0% year over year, while adjusted operating income rose 10.6%. The company raised the low end of its fiscal 2026 adjusted earnings-per-share forecast to $8.20, from a previous range of $7.90 to $8.10.
In the market, CVS shares closed at $83.85 on November 6, 2026. The company says the two independent companies are expected to receive strong investment-grade credit ratings when the separation is completed, with strong balance sheets and free cash flows to fund each company’s priorities and pay attractive dividends. CVS is targeting completion in the first half of 2028, through a separation that it says is designed to be tax-free to the company and its shareholders for U.S. federal income tax purposes. Under the announced plan, shareholders will own shares in both entities after the separation. The transaction remains subject to board approval, the effectiveness of the Form 10 registration statement and customary confirmation of the tax treatment.
In its filing with the U.S. Securities and Exchange Commission, CVS warned that the separation could be delayed or might not be completed on the announced terms or timetable. It also cautioned that lost-synergy, restructuring and other costs could exceed the company’s estimates. The filing said, "There can be no assurance that CVS Health will be able to complete the proposed separation on the terms or within the timeline announced." The warning places the $500 million estimate within an execution plan extending through the first half of 2028 and subject to approval, registration and tax-confirmation requirements. Recurring costs and one-time separation costs remain separate items in management’s estimates as the company awaits completion of the steps required for the separation.