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CVS Health (CVS) Q1 Earnings Beat Estimates, EPS View Up

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CVS Health Corporation's (CVS - Free Report) first-quarter 2021 adjusted earnings per share (EPS) of $2.04 improved 6.8% year over year and also exceeded the Zacks Consensus Estimate by 18.6%. The adjusted EPS figure takes into account certain asset amortization costs and acquisition-related integration costs along with other adjustments.

On a reported basis, the company’s earnings of $1.68 per share rose 9.8% year over year.

Total revenues in the first quarter rose 3.5% year over year to $69.09 billion. The top line also beat the Zacks Consensus Estimate by 0.9%.

Quarter in Detail

Pharmacy Services revenues were up 3.8% to $36.33 billion in the reported quarter. Continued price compression and a weak cough, cold and flu season were partially offset by growth net new business, growth in specialty pharmacy, product mix and brand inflation.

CVS Health Corporation Price, Consensus and EPS Surprise

CVS Health Corporation Price, Consensus and EPS Surprise

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

Total pharmacy claims processed fell 1% on a 30-day equivalent basis, attributable to a weak cough, cold and flu season, partially offset by strong net new business.

Revenues from CVS Health’s Retail/LTC were up 2.3% year over year to $23.27 billion. In the quarter, increased COVID-19  diagnostic  testing  and  vaccinations  and  brand  inflation were partially offset by lower front store revenues, primarily due to the acceleration of demand in March 2020, a weak cough, cold and flu season, continued reimbursement pressure and the impact of recent generic introductions.

Within Health Care Benefits segment, the company registered revenues worth $20.48 billion in the first quarter, up 6.7% year over year. The improvement was primarily driven by growth in the Government Services business, partially offset by the unfavorable impact of the repeal of the HIF (Health Insurer Fee) for 2021.

Margin

Gross profit (considering benefit cost) improved 3.9% to $12.49 billion. Gross margin expanded 7 basis points (bps) to 38.9%. Operating margin in the quarter under review fell 1 bps to 5.17% despite a 3.3% rise in adjusted operating profit to $3.58 billion.

2021 Outlook

CVS Health has raised its 2021 adjusted EPS guidance. Adjusted EPS is expected in the band of $7.56-$7.78 (compared with the earlier provided range of $7.39-$7.55). The Zacks Consensus Estimate for 2021 earnings is pegged at $7.55.

Full-year operating cash flow projection has been reaffirmed in the range of $12 billion-$12.50 billion.

Our Take

CVS Health first-quarter earnings and revenues surpassed the respective Zacks Consensus Estimate. Revenues across all the three operating segments improved in the quarter. Increased guidance amid the pandemic scenario is another positive.

However, a weak cough, cold and flu season impacted growth within both Pharmacy Services and Retail/LTC. Also, the repeal of the HIF for 2021 hampered growth for Health Care Benefits.

Zacks Rank and Key Picks

CVS Health currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are Boston Scientific Corporation (BSX - Free Report) , Illumina, Inc. (ILMN - Free Report) and HCA Healthcare, Inc. (HCA - Free Report) . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Boston Scientific reported first-quarter 2021 adjusted EPS of 37 cents beat the Zacks Consensus Estimate by 23.3%. Net revenues of $2.75 billion outpaced the consensus estimate by 5.3%. It currently carries a Zacks Rank #2 (Buy).

Illumina, a Zacks Rank #2 company, reported first-quarter 2021 adjusted EPS of $1.89, beating the Zacks Consensus Estimate by 38.9%. Revenues of $1.09 billion outpaced the consensus estimate of $1.08 billion.

HCA Healthcare reported first-quarter 2021 adjusted EPS of $4.14, surpassing the Zacks Consensus Estimate by 23.6%. Net revenues of $14 billion exceeded the Zacks Consensus Estimate by 2.2%. It currently carries a Zacks Rank #2.

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