CVS Health: Outlook Outpaces Estimates; Q3 Results Beat


CVS Health Corporation (CVS) has provided upbeat 2021 guidance after the company posted better-than-expected Q3 results. Following the news, shares of the healthcare company rose 5.7% to close at $96.34 on Wednesday.

The company registered adjusted earnings of $1.97 per share, topping Street estimates of $1.77 per share. CVS Health had reported adjusted earnings of $1.66 per share in the same quarter last year.

In other positive news, revenues inched up 10% year-over-year to $73.8 billion and came well ahead of analysts’ expectations of $70.4 billion. (See CVS Health stock charts on TipRanks)

Segment-wise, Health Care Benefits recorded revenues of $20.5 billion, up 9.5% year-over-year, while revenues at Pharmacy Services grew 9.3% to $39 billion. Additionally, Retail/LTC revenues came in at $25 billion, up 10%.

During the quarter, the company administered more than 8 million COVID-19 tests and over 11 million COVID-19 vaccines in the U.S.

Outlook

For 2021, the company projects adjusted EPS to be in a range of $7.90 to $8.00 per share, up from the prior guidance range of $7.70 to $7.80 per share. The consensus estimate stands at $7.79. Cash flow from operations is anticipated to be in the range of $13 billion to $13.5 billion.

During the earnings call, the CFO of CVS Health, Shawn Guertin, said, “We believe that current analyst estimates for 2022 adjusted EPS of approximately $8.20 are within our anticipated initial guidance range. For retail, we expect that COVID-19 vaccine and testing volume, which is expected to generate over $3 billion of revenue in 2021, will decline significantly in 2022 to 30% to 40% of the volume we administered in 2021.”

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Wall Street’s Take

Following the upbeat third-quarter earnings, Cantor Fitzgerald analyst Steven Halper maintained a Buy rating on the stock and lifted the price target to $115 (19.37% upside potential) from $95.

Halper commented, “We expect CVS to generate healthy free cash flow and for the company to continue to execute on its integrated healthcare strategy. The shares are inexpensive, in our opinion, at just 11.9x our revised 2021 adjusted EPS estimate.”

Consensus among analysts is a Strong Buy, based on 9 Buys and 1 Hold. The average CVS Health price target stands at $102.40 and implies upside potential of about 6.3% to current levels. Shares have increased almost 60% over the past year.

Website Traffic

TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into CVS Health’s performance.

According to the tool, the CVS Health website recorded an 80.28% monthly growth, year-over-year, in global visits in September. Also, year-to-date website growth, compared to year-to-date website growth in the previous year, came in at 98.42%.

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