Back to top

Image: Bigstock

CVS Health (CVS) Q1 Earnings Top Estimates, '22 EPS View Up

Read MoreHide Full Article

CVS Health Corporation's (CVS - Free Report) first-quarter 2022 adjusted earnings per share (EPS) of $2.22 rose 8.8% year over year and exceeded the Zacks Consensus Estimate by 3.7%. The adjusted EPS figure considers certain asset amortization costs, acquisition-related integration costs and other adjustments.

On a reported basis, the company’s GAAP EPS of $1.74 rose 3.6% year over year.

Total revenues in the first quarter rose 11.2% year over year to $76.83 billion. The top line also beat the Zacks Consensus Estimate by 1.7%.

Quarter in Detail

Pharmacy Services revenues were up 8.6% to $39.46 billion in the reported quarter. The upside was primarily driven by increased pharmacy claims volume, growth in specialty pharmacy and brand inflation, partially offset by continued client price improvements.

Total pharmacy claims processed rose 5.8% on a 30-day equivalent basis, attributable to strong net new business, greater utilization, and a weaker cough, cold, and flu season in the prior year. Without considering the COVID-19 vaccinations, total pharmacy claims processed increased 5.5% on a 30-day equivalent basis.

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

Revenues from CVS Health’s Retail/LTC segment were up 9.2% year over year to $25.42 billion. The impressive growth was driven by increased prescription and front store volume, including the sale of COVID-19 OTC test kits and the impact of a weaker cough, cold and flu season in the prior year as well as pharmacy brand inflation. However, this growth was partially offset by the impact of recent generic introductions, persistent pharmacy reimbursement pressure and a decline in COVID-19 diagnostic testing.

Within the Health Care Benefits segment, the company registered revenues worth $23.11 billion in the first quarter, up 12.8% year over year. The improvement was primarily driven by growth across all product lines. The segment also benefited from favorable development of the prior years’ health care cost estimates in its Government Services and Commercial businesses.

Margin

Total cost (including Benefit Cost) rose 12.1% to $63.46 billion in the first quarter. Gross profit rose 6.9% to $13.37 billion. Gross margin contracted 69 basis points (bps) to 17.4%. Operating margin in the quarter under review contracted 63 bps to 4.5%, with a 2.4% plunge in operating profit to $3.49 billion.

2022 Guidance

CVS Health has updated its EPS guidance for full-year 2022.

The company currently expects adjusted EPS in the band of $8.20-$8.40 (up from the earlier projected $8.10-$8.30). The Zacks Consensus Estimate for 2022 earnings is pegged at $8.23.

The company has reaffirmed full-year operating cash flow projection at the range of $12.0-$13.0 billion.

Our Take

CVS Health exited the first quarter of 2022 with earnings and revenues beating the Zacks Consensus Estimate. The impressive top-line performance was driven by sales growth across all three operating segments. The company administered more than 6 million COVID-19 tests and above 8 million COVID-19 vaccines nationwide in the first quarter. The company’s continued investments in constructing affordable housing units in Denver, Fresno, Nashville, and San Antonio, to address housing insecurities and enhance access to health care services in underserved communities seem encouraging. The raised EPS guidance for 2022 is indicative that this growth momentum will continue.

However, the contraction of margins on escalating costs does not bode well. The decline in operating profit due to the development of a legal settlement accrual related to the pending agreement with the State of Florida to settle all opioid claims against CVS Health raises apprehension.

Zacks Rank and Key Picks

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

Some better-ranked stocks in the broader medical space that have announced quarterly results are Alkermes plc (ALKS - Free Report) , Medpace Holdings, Inc. (MEDP - Free Report) and UnitedHealth Group Incorporated (UNH - Free Report) .

Alkermes reported first-quarter 2022 adjusted EPS of 12 cents, which surpassed the Zacks Consensus Estimate of a penny. Revenues of $278.6 million outpaced the Zacks Consensus Estimate by 6.2%. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alkermes has an estimated long-term growth rate of 25.1%. ALKS’ earnings surpassed estimates in the trailing four quarters, the average surprise being 350.5%.

Medpace reported first-quarter 2022 adjusted EPS of $1.69, which surpassed the Zacks Consensus Estimate by 34.1%. Revenues of $330.9 million outpaced the Zacks Consensus Estimate by 1.1%. It currently has a Zacks Rank #2.

Medpace has a historical growth rate of 27.3%. MEDP’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.1%.

UnitedHealth, having a Zacks Rank #2, reported first-quarter 2022 adjusted EPS of $5.49, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $80.1 billion outpaced the consensus mark by 1.9%.

UnitedHealth has an estimated long-term growth rate of 14.8%. UNH’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%.

Published in