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Is a Beat in the Cards for CVS Health (CVS) in Q1 Earnings?

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CVS Health Corporation (CVS - Free Report) is scheduled to report first-quarter 2021 results on May 4, before the opening bell.

In the last reported quarter, the company delivered an earnings surprise of 4.84%. It beat earnings estimates in each of the trailing four quarters, the earnings surprise being 20.67%, on average.

Factors at Play

Amid the pandemic, CVS Health’s specialty digital solutions for patients have been growing strongly. The company has been seeing over 40% of all specialty orders being placed digitally. CVS Health’s consumer centric digital strategy has become even more relevant as people are using technology more while they stay at home. The company achieved higher levels of engagement across its digital assets. This digital trend, which has accelerated with COVID-19, is expected to have strongly contributed to the company’s first-quarter performance.

In late 2020, the company launched a digital platform to assist in registration of COVID-19 patients for clinical trials as vaccines and therapeutic treatments. This new service is a natural extension of CVS Health’s clinical and data analytics capabilities. This development is expected to have made a full-quarter contribution to the company’s first-quarter top line.

CVS Health Corporation Price and EPS Surprise

CVS Health Corporation Price and EPS Surprise

CVS Health Corporation price-eps-surprise | CVS Health Corporation Quote

In terms of COVID-19 testing, per the company’s February update, as the largest community testing organization in the United States, it administered approximately 15 million tests at more than 4,800 testing locations nationwide.Additionally, the company launched Return Ready solution, the company’s comprehensive B2B testing product that has been helping its clients get back to work or school by offering testing and support services directly to employers and educators.Till Feb 16, 100 clients have enrolled representing over 1.5 million individuals. These developments are expected to have significantly contributed to the company’s top line in Q1.

In terms of COVID-19 vaccine, in March, CVS Health stated that it has nearly doubled the number of states where select CVS Pharmacy locations are offering COVID-19 vaccines to eligible populations through the Federal Retail Pharmacy Program (FRPP). The company is now administering vaccines in nearly 1,200 stores across 29 states and Puerto Rico.This should have significantly contributed to the company’s first-quarter top line.

Within pharmacy services, like most of the pharmacy benefits managers (PBM), CVS Health has been bearing the brunt of the pandemic in the form of client losses and continued price compression. However, given the gradually increasing number of walk-in-clinical appointments and patient visits, the company, which has a huge PBM client base, is expected to have seen a sequential rebound in first-quarter revenues. Improvements in purchasing economics and the ongoing benefit from several generic launches are also expected to have fueled growth.

Over the past few quarters, the company has been experiencing growth in Specialty Pharmacy and brand inflation. The specialty pharmacy capabilities, wherein it is expected to have witnessed continued growth, include Coram infusion professionals and collaborations with hospitals and providers to help transition eligible IV therapy patients to home-based care. This, while freeing up important hospital bed capacity, is likely to have reduced cost of care in the first quarter.

Within healthcare benefits, the company earlier noted that medical cost utilization largely returned to normal levels since mid-2020. This trend is likely to have continued through the first quarter. Further, this segment is expected to have gained from significantly lower medical costs.

The Estimate Picture

The Zacks Consensus Estimate for first-quarter adjusted earnings of $1.71 suggests a 10.5% decline from the year-ago quarter reported figure. The consensus estimate for revenues is currently pegged at $68.44 billion, indicating 2.5% growth from the year-earlier reported number.

What the Quantitative Model Predicts

Per our proven model, a stock with a  positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has good chances of beating estimates. This is the case here as you can see:

Earnings ESP:  CVS Health has an Earnings ESP of +3.33%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: CVS Health carries a Zacks Rank #3.

Other Stocks Worth a Look

Here are a few other medical stocks worth considering as these also have the right combination of elements to beat on earnings this reporting cycle.

Pacira BioSciences, Inc. (PCRX - Free Report) has an Earnings ESP of +3.80% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Cooper Companies, Inc. (COO - Free Report) has an Earnings ESP of +7.06% and a Zacks Rank of 2, at present.

Owens & Minor, Inc. (OMI - Free Report) has an Earnings ESP of +2.41% and is a Zacks #2 Ranked stock.

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