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Can CVS Health (CVS) Spring a Surprise this Earnings Season?
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CVS Health Corporation (CVS - Free Report) is scheduled to report its first-quarter 2017 results before the opening bell on May 2. Last quarter, the company posted a positive earnings surprise of 2.4%. Its trailing four-quarter average surprise was a positive 2.53%. Let's see how things are shaping up prior to this announcement.
Factors at Play
CVS Health is optimistic about sustaining its solid year-over-year earnings trend in 2017 as well, driven by the gains to be realized from the Pharmacy Services segment. However, according to the company, there are several timing factors that have already started to affect the cadence of profit delivery.
These factors include the introduction and timing of break-open in generics, the timing of profitability in Medicare Part D business, the timing of the benefits from the company’s strategies to drive growth in the front end, and the timing of share repurchases along with certain tax benefits among others. With that in mind, during the last earnings call, it forecasted first-quarter adjusted earnings per share guidance in the range of $1.07 to $1.13, a decline of 4.75% to 9.75%.
This apart, the company is also worried about its Retail/Long Term Care and the Pharmacy services segments’ performance which was more impacted by lower inflation than what we originally forecasted. Additionally, the company reduced 2017 script growth expectations at Retail to account for some softness seen within the business.
Accordingly, for the first quarter, CVS Health expects a decline of revenues in the Retail/Long Term Care segment of between 3.25% and 5%, with same-store sales falling 4.25% to 6% and same-store scripts reducing 1% to 2%.
However, we expect the company to benefit from the acquisition of Target Pharmacy, whose integration has been completed. CVS Health expects script performance to improve year over year, driven by the strength in patient care programs and Maintenance Choice.
Also, it expects PBM revenues to grow 6.25% to 8%, and consolidated net revenues to rise 1% to 2.75% during the first quarter. Overall, the company projects to deliver healthy PBM growth on a successful PBM selling season. Specialty business is expected to record strong growth and SilverScript's business is also expected to continue performing well.
We take a note that CVS Health’s estimate revision trend remains unfavorable at this moment. For the first quarter, the company saw three downward movements with no movement in the opposite direction, over last 60 days. The magnitude of the trend on the other hand was inconclusive with earnings estimates remaining unchanged at $1.10, over the same time frame.
Earnings Whispers
Our proven model does not conclusively show that CVS Health is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is, however, not the case here as you will see below.
Zacks ESP: CVS Health's Earnings ESP is -0.91%, as the Most Accurate estimate is a penny lower than the Zacks Consensus Estimate of $1.10. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: CVS Health has a Zacks Rank #3 which increases the predictive power of ESP. However, a negative ESP makes surprise prediction difficult.
Note that we caution against stocks with Zacks Ranks #4 and 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are three companies you may want to consider as our proven model shows they have the right combination of elements to post an earnings beat this quarter:
Humana Inc. (HUM - Free Report) has an Earnings ESP of +2.06% and a Zacks Rank #2.
Hill-Rom Holdings, Inc. has an Earnings ESP of +1.27% and a Zacks Rank #2.
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Can CVS Health (CVS) Spring a Surprise this Earnings Season?
CVS Health Corporation (CVS - Free Report) is scheduled to report its first-quarter 2017 results before the opening bell on May 2. Last quarter, the company posted a positive earnings surprise of 2.4%. Its trailing four-quarter average surprise was a positive 2.53%. Let's see how things are shaping up prior to this announcement.
Factors at Play
CVS Health is optimistic about sustaining its solid year-over-year earnings trend in 2017 as well, driven by the gains to be realized from the Pharmacy Services segment. However, according to the company, there are several timing factors that have already started to affect the cadence of profit delivery.
These factors include the introduction and timing of break-open in generics, the timing of profitability in Medicare Part D business, the timing of the benefits from the company’s strategies to drive growth in the front end, and the timing of share repurchases along with certain tax benefits among others. With that in mind, during the last earnings call, it forecasted first-quarter adjusted earnings per share guidance in the range of $1.07 to $1.13, a decline of 4.75% to 9.75%.
This apart, the company is also worried about its Retail/Long Term Care and the Pharmacy services segments’ performance which was more impacted by lower inflation than what we originally forecasted. Additionally, the company reduced 2017 script growth expectations at Retail to account for some softness seen within the business.
CVS Health Corporation Price and EPS Surprise
CVS Health Corporation Price and EPS Surprise | CVS Health Corporation Quote
Accordingly, for the first quarter, CVS Health expects a decline of revenues in the Retail/Long Term Care segment of between 3.25% and 5%, with same-store sales falling 4.25% to 6% and same-store scripts reducing 1% to 2%.
However, we expect the company to benefit from the acquisition of Target Pharmacy, whose integration has been completed. CVS Health expects script performance to improve year over year, driven by the strength in patient care programs and Maintenance Choice.
Also, it expects PBM revenues to grow 6.25% to 8%, and consolidated net revenues to rise 1% to 2.75% during the first quarter. Overall, the company projects to deliver healthy PBM growth on a successful PBM selling season. Specialty business is expected to record strong growth and SilverScript's business is also expected to continue performing well.
We take a note that CVS Health’s estimate revision trend remains unfavorable at this moment. For the first quarter, the company saw three downward movements with no movement in the opposite direction, over last 60 days. The magnitude of the trend on the other hand was inconclusive with earnings estimates remaining unchanged at $1.10, over the same time frame.
Earnings Whispers
Our proven model does not conclusively show that CVS Health is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is, however, not the case here as you will see below.
Zacks ESP: CVS Health's Earnings ESP is -0.91%, as the Most Accurate estimate is a penny lower than the Zacks Consensus Estimate of $1.10. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: CVS Health has a Zacks Rank #3 which increases the predictive power of ESP. However, a negative ESP makes surprise prediction difficult.
Note that we caution against stocks with Zacks Ranks #4 and 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are three companies you may want to consider as our proven model shows they have the right combination of elements to post an earnings beat this quarter:
Becton, Dickinson and Company (BDX - Free Report) has an Earnings ESP of +0.45% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.
Humana Inc. (HUM - Free Report) has an Earnings ESP of +2.06% and a Zacks Rank #2.
Hill-Rom Holdings, Inc. has an Earnings ESP of +1.27% and a Zacks Rank #2.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging
phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>