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CVS Health (CVS) Down 14.5% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for CVS Health (CVS - Free Report) . Shares have lost about 14.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is CVS Health due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
CVS Health Q4 Earnings Surpass Estimates, Margins Down
CVS Health’s fourth-quarter 2022 adjusted earnings per share of $1.99 improved 0.5% year over year and exceeded the Zacks Consensus Estimate by 3.1%. The adjusted EPS figure considers certain asset amortization costs, opioid litigation charges, and other adjustments.
On a reported basis, the company’s GAAP earnings were $1.75 per share, up 78.6% year over year.
For the full year, adjusted earnings were $8.69 per share, up 3.5% from the year-ago period’s levels. The figure beat the Zacks Consensus Estimate by 0.7%.
Total revenues in the fourth quarter rose 9.5% year over year to $83.85 billion. The top line also beat the Zacks Consensus Estimate by 11.8%.
Total revenues for 2022 were $322.47 billion, reflecting a 10.4% rise from the year-ago period. The figure beat the Zacks Consensus Estimate by 2.9%.
Quarter in Detail
Pharmacy Services revenues were up 11.2% to $43.75 billion in the reported quarter. The upside was primarily driven by increased pharmacy claims volume, and growth in specialty pharmacy and brand inflation, partially offset by continued client price improvements.
Total pharmacy claims processed rose 3.1% on a 30-day equivalent basis, attributable to net new business, increased utilization and the impact of an elevated cough, cold and flu season, partially offset by a decrease in COVID-19 vaccinations. Excluding the impact of COVID-19 vaccinations, total pharmacy claims processed increased 4.6% on a 30-day equivalent basis.
Revenues from CVS Health’s Retail/LTC segment were up 4% year over year to $28.18 billion. The impressive growth was driven by increased prescription and front store volume, including the impact of an elevated cough, cold and flu season compared to the prior year, pharmacy drug mix and brand inflation. However, this growth was partially offset by a decline in COVID-19 diagnostic testing and vaccinations, the impact of recent generic introductions and continued pharmacy reimbursement pressure.
Within the Health Care Benefits segment, the company registered revenues worth $23.03 billion in the fourth quarter, up 11.3% year over year.
Margin
Total cost (including Benefit Costs) rose 11.2% to $70.03 billion in the fourth quarter. Gross profit rose 1.2% to $13.81 billion. The gross margin contracted 135 basis points (bps) to 16.5%.
The adjusted operating margin in the quarter under review contracted 24 bps to 4.4%, despite a 3.9% rise in adjusted operating profit to $3.73 billion.
2023 Guidance
CVS Health reaffirmed its adjusted EPS guidance for full-year 2023 in the band of $8.70 to $8.90. The Zacks Consensus Estimate for 2023 earnings is pegged at $8.84.
The company has also issued its full-year operating cash flow projection in the range of $12.5 billion to $13.5 billion.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -5.93% due to these changes.
VGM Scores
Currently, CVS Health has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, CVS Health has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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CVS Health (CVS) Down 14.5% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for CVS Health (CVS - Free Report) . Shares have lost about 14.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is CVS Health due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
CVS Health Q4 Earnings Surpass Estimates, Margins Down
CVS Health’s fourth-quarter 2022 adjusted earnings per share of $1.99 improved 0.5% year over year and exceeded the Zacks Consensus Estimate by 3.1%. The adjusted EPS figure considers certain asset amortization costs, opioid litigation charges, and other adjustments.
On a reported basis, the company’s GAAP earnings were $1.75 per share, up 78.6% year over year.
For the full year, adjusted earnings were $8.69 per share, up 3.5% from the year-ago period’s levels. The figure beat the Zacks Consensus Estimate by 0.7%.
Total revenues in the fourth quarter rose 9.5% year over year to $83.85 billion. The top line also beat the Zacks Consensus Estimate by 11.8%.
Total revenues for 2022 were $322.47 billion, reflecting a 10.4% rise from the year-ago period. The figure beat the Zacks Consensus Estimate by 2.9%.
Quarter in Detail
Pharmacy Services revenues were up 11.2% to $43.75 billion in the reported quarter. The upside was primarily driven by increased pharmacy claims volume, and growth in specialty pharmacy and brand inflation, partially offset by continued client price improvements.
Total pharmacy claims processed rose 3.1% on a 30-day equivalent basis, attributable to net new business, increased utilization and the impact of an elevated cough, cold and flu season, partially offset by a decrease in COVID-19 vaccinations. Excluding the impact of COVID-19 vaccinations, total pharmacy claims processed increased 4.6% on a 30-day equivalent basis.
Revenues from CVS Health’s Retail/LTC segment were up 4% year over year to $28.18 billion. The impressive growth was driven by increased prescription and front store volume, including the impact of an elevated cough, cold and flu season compared to the prior year, pharmacy drug mix and brand inflation. However, this growth was partially offset by a decline in COVID-19 diagnostic testing and vaccinations, the impact of recent generic introductions and continued pharmacy reimbursement pressure.
Within the Health Care Benefits segment, the company registered revenues worth $23.03 billion in the fourth quarter, up 11.3% year over year.
Margin
Total cost (including Benefit Costs) rose 11.2% to $70.03 billion in the fourth quarter. Gross profit rose 1.2% to $13.81 billion. The gross margin contracted 135 basis points (bps) to 16.5%.
The adjusted operating margin in the quarter under review contracted 24 bps to 4.4%, despite a 3.9% rise in adjusted operating profit to $3.73 billion.
2023 Guidance
CVS Health reaffirmed its adjusted EPS guidance for full-year 2023 in the band of $8.70 to $8.90. The Zacks Consensus Estimate for 2023 earnings is pegged at $8.84.
The company has also issued its full-year operating cash flow projection in the range of $12.5 billion to $13.5 billion.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -5.93% due to these changes.
VGM Scores
Currently, CVS Health has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, CVS Health has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.