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Is a Beat in the Cards for CVS Health (CVS) in Q2 Earnings?

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

In the last reported quarter, the company delivered an earnings surprise of 18.60%. It beat earnings estimates in each of the trailing four quarters, the earnings surprise being 20.03%, on average.

Factors at Play

Over the recent months, CVS Health’s specialty digital solutions for patients have been growing strongly. The company is seeing a significant part of its specialty orders being placed digitally with primary growth drivers being engagement in expanded set of digital health services such as COVID testing, vaccinations and omni-channel pharmacy.

The company, being an active member of the President’s vaccination drive, is relying on its consumer-centric digital approach to administer vaccines in 49 states and in more than 8,300 CVS locations. This is expected to have strongly contributed to the company’s second-quarter performance within retail segment. On the first-quarter earnings call, the company noted that in the month of April, it had seen a nation-wide trend of vaccinated customers actively shopping in CVS locations. With the vaccination drive being actively conducted by the company through the months of the second quarter, this trend is expected to have continued.

CVS Health Corporation Price and EPS Surprise

CVS Health Corporation Price and EPS Surprise

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

CVS Health has also been expanding access to care through digital and virtual channels. The company has launched a digital-first primary care model that helps consumers navigate the best site of care for their health needs. As a major step toward digital health, the company announced the launch of CVS Health Ventures fund that gives insight into new digital health innovations. These developments too should get reflected in the Q2 results.

However, in terms of COVID-19 testing, going by the industry trend, the company is expected to have registered significant decline in testing administration related revenues in a continuous drop incases through the months of the second quarter.

Within pharmacy services, the company is expected to have achieved strong revenue and operating income growth in the second quarter following months of pandemic-induced client losses and price compression. 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 strong sequential rebound in second-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 second 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 second quarter. Further, this segment is expected to have gained from significantly lower medical costs.

The Estimate Picture

The Zacks Consensus Estimate for second-quarter adjusted earnings of $2.07 suggests a 21.59% decline from the year-ago quarter reported figure. The consensus estimate for revenues is currently pegged at $70.08 billion, indicating 7.25% growth from the year-earlier reported number.

What the Quantitative Model Predicts

Our proven model predicts an earnings beat for CVS Health this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.

Earnings ESP:  CVS Health has an Earnings ESP of +0.54%. 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 medical stocks worth considering as these also have the right combination of elements to beat on earnings this reporting cycle.

Hill-Rom Holdings, Inc.  has an Earnings ESP of +0.56% and a Zacks Rank #2, currently. The stock is slated to release third-quarter fiscal 2021 results on Jul 30.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Illumina, Inc. (ILMN - Free Report) has an Earnings ESP of +2.36% and a Zacks Rank of 2, at present. The stock is slated to release second-quarter 2021 results on Aug 5.

Henry Schein, Inc. (HSIC - Free Report) has an Earnings ESP of +0.91% and is a Zacks #2 Ranked stock. The company is slated to release its second-quarter 2021 results on Aug 3.

In-Depth Zacks Research for the Tickers Above

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Illumina, Inc. (ILMN) - free report >>

Henry Schein, Inc. (HSIC) - free report >>

CVS Health Corporation (CVS) - free report >>