Healthcare is quietly becoming the value hunter’s playground of 2026. While the mega cap tech trade keeps sucking up oxygen, two of the largest healthcare names in the S&P 500 are trading at forward multiples that look mispriced against their earnings power.
Morningstar’s 2026 outlook flagged US healthcare as one of the few sectors still offering broad value in an otherwise fully priced market, and PineBridge’s 2026 Equity Outlook noted that new pricing agreements with Medicare and Medicaid and a 15% cap on pharmaceutical imports have alleviated the worst tail risks for the sector.
Against that backdrop, CVS and Pfizer both trade well below their earnings-power valuations. One is a legitimate turnaround with a raised guide; the other is a dividend heavyweight rebuilding its pipeline. Here is the case for each in July.
CVS Health (NYSE: CVS)
CVS Health (NYSE:CVS | CVS Price Prediction) has quietly become one of the best-performing large caps of 2026. Shares closed at $103.61 on July 6, 2026, riding a 30.76% year-to-date gain and a 56.84% run over the past 12 months. Even with that move, the valuation still screens as cheap: forward P/E of 14, well below the healthcare sector’s typical high-teens multiple, on a company generating trailing revenue of $405.6 billion.
The Q1 2026 report is what changed the story. CVS delivered adjusted EPS of $2.57 against a $2.21 consensus, a 16.47% beat, on revenue of $100.43 billion. That was the fourth consecutive EPS beat. The Aetna turnaround is the engine: Health Care Benefits adjusted operating income surged 52.6% to $3.04 billion, and the medical benefit ratio improved to 84.6% from 87.3%. Management responded by raising the full-year guide to adjusted EPS of $7.30 to $7.50 (from $7 to $7.20) and operating cash flow of at least $9.5 billion.
CEO David Joyner is leaning into the integrated model, telling investors CVS is building trust across “nearly 185 million people”. New GLP-1 initiatives layer on optionality: CVS launched a Medicare GLP-1 Bridge program with $50 monthly copays and a $49 MinuteClinic virtual weight-management visit in June 2026. Wall Street is warming up. The consensus analyst target sits at $105.69, with 24 Buy or Strong Buy ratings against only four Hold ratings and zero Sell ratings.
Risk to watch: the discount is narrowing. Elevated healthcare cost trends persist, pharmacy reimbursement pressure remains, and 2025 saw a $5.7 billion goodwill impairment tied to Health Care Delivery plus roughly $1.2 billion of legacy litigation charges. A stumble on medical cost trend could compress the multiple quickly.
Pfizer (NYSE: PFE)
Pfizer (NYSE:PFE) is where the “absurdly cheap” descriptor is doing real work. Shares traded at $24.08 as of July 7, 2026, and are essentially flat over the last year (+0.02%) and down 8.91% over the past month. At this price, forward P/E is 8, roughly half the healthcare sector average, and the dividend yield sits at 7.2% on a $1.72 annual payout.
The fundamentals tell a stronger story. Q1 2026 delivered adjusted diluted EPS of $0.75 versus a $0.72 consensus, a 3.92% beat, on revenue of $14.45 billion (+5.4% year over year), extending the EPS beat streak to five quarters. Launched and acquired products grew 22% operationally, with Padcev up 39% and Nurtec ODT/Vydura up 41%. Full-year guidance was reaffirmed at $59.5 billion to $62.5 billion in revenue and $2.80 to $3.00 in adjusted diluted EPS.
The pipeline is the second leg of the thesis. Roughly 20 key pivotal studies are on track to start in 2026, including obesity assets from the Metsera acquisition (~$7 billion) that Pfizer closed to bolster its GLP-1 pipeline. The Vyndamax patent settlement extended U.S. exclusivity to June 2031, taking a major overhang off the table. Meanwhile, the Lyme disease vaccine posted 73.2% efficacy in the Phase 3 VALOR trial. CEO Albert Bourla told investors he is “particularly encouraged by what we’re seeing in oncology and obesity, two areas where I believe Pfizer is positioned to lead.”
Income investors have another angle worth flagging (the Dividend Traps report is worth a look for anyone stress-testing yields above 7%).
Risk to watch: COVID revenue continues to normalize, with Comirnaty down 59% and Paxlovid down 63% operationally in Q1 2026, and management is guiding for roughly $1.5 billion in unfavorable revenue impact from generic and biosimilar competition in 2026. Add CFO Dave Denton’s August 15, 2026 departure for Nike and Section 232 pharma tariff uncertainty, and there is real reason the multiple is compressed. The question for investors is whether an 8x forward multiple with a 7.2% yield already prices those risks in.
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