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CVS Health (CVS) to Report Q4 Earnings: What's in the Cards?
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CVS Health Corporation (CVS - Free Report) is scheduled to report fourth-quarter 2023 results on Feb 7 before the opening bell.
In the last reported quarter, the company’s adjusted earnings of $2.21 exceeded the Zacks Consensus Estimate by 3.76%. The company beat estimates in the trailing four quarters, the average surprise being 4.49%.
Let’s look at how things have shaped for CVS Health before this announcement.
Factors at Play
Health Care Benefits
The segment is likely to have witnessed a robust performance in the fourth quarter of 2023, backed by growth across multiple product lines. Medical membership may have increased significantly compared to the prior year, driven by increases in the individual exchange, Medicare and commercial businesses.
Medicare Advantage is a key strategic growth area for CVS’ business. Earlier, the company demonstrated significant progress in restoring its member experience ratings, which may have helped the company navigate some of the emerging Medicare Advantage medical cost pressures in the fourth quarter of 2023. Also, CVS may have continued to experience elevated utilization trends in the Medicare Advantage business, primarily in outpatient and supplemental benefits such as dental, behavioral health, OTC and flex card.
The company launched its wholly owned subsidiary, Cordavis, in the third quarter of 2023, which will work directly with pharmaceutical manufacturers to commercialize and co-produce high-quality biosimilar products. In the fourth quarter of 2023, CVS is expected to have capitalized on the multi-billion dollar biosimilar market in the United States by bringing about a portfolio of biosimilar products to the market and allowing significant long-term savings potential available through biosimilars. This development is likely to have boosted the company’s revenues in the to-be-reported quarter.
Going by the Zacks Consensus Estimate, CVS’ Health Care Benefits arm revenues are likely to have improved 11.3% sequentially in the fourth quarter of 2023.
Health Services
In the fourth quarter of 2023, the segment is likely to have reflected continued momentum, backed by the impressive performance in the pharmacy services business. CVS may have consistently demonstrated value to consumers and clients by successfully managing drug cost trends and bringing innovative clinical solutions to the market.
In addition, the pharmacy drug mix, growth in specialty pharmacy, brand inflation and the addition of Signify and Oak Street may have also favorably impacted the company’s revenues in the to-be-reported quarter. CVS may have further progressed on its initiatives to create integrated health experiences across multiple channels, including Aetna, Signify, CVS Retail Health and CVS Pharmacy. For Signify Health, CVS is likely to have succeeded in connecting more CVS Pharmacy patients to Signify for in-home evaluation and other services in the home. All these efforts are expected to have a positive impact on the company’s revenues in the fourth quarter of 2023.
Pharmacy & Consumer Wellness
Across this division, the impact of the pharmacy drug mix, increased prescriptions and brand inflation are likely to have helped CVS deliver increased revenues in the fourth quarter of 2023. We assume the retail pharmacy business to have strongly performed. Same-store pharmacy sales are also likely to have been driven by the drug mix, an increase in same-store prescription volumes and brand inflation. Excluding the COVID-19 impact, same-store prescription volumes are also likely to have grown modestly in the to-be-reported quarter.
In terms of the consumer engagement strategy, CVS might have significantly expanded its digital reach with more customers, backed by its customer-focused innovations and relevant experiences. The company’s strong digital engagement and enhanced capabilities are likely to have helped strengthen its ability to drive seasonal flu, COVID-19 and RFD immunization awareness and connect patients to the CVS locations for these important health services. All these developments are likely to have benefitted the company’s revenues in the fourth quarter of 2023.
However, continued reimbursement pressure, the impact of recent generic introductions, a decrease in the store count, and decreased COVID-19-related volumes might have partially dented the segment’s improvement rate in the to-be-reported quarter, thus affecting the results of operations.
Key Q4 Estimates
The Zacks Consensus Estimate for fourth-quarter 2023 adjusted earnings of $1.98 per share suggests a 0.5% fall from the year-ago reported figure.
The consensus estimate for revenues is pegged at $90.25 billion, calling for a 7.6% rise from the prior-year reported number.
What Our Model Suggests
Per our proven model, stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), along with a positive Earnings ESP, have a higher chance of beating estimates, which is the case below:
Earnings ESP: CVS Health has an Earnings ESP of +1.40%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #2.
Other Stocks Worth a Look
Here are some other medical stocks worth considering as these also have the right combination of elements to post an earnings beat this quarter:
ABT has an earnings yield of 4.03% compared to the industry’s -0.62%. ABT surpassed earnings in each of the trailing four quarters, the average being 6.76%.
RxSight (RXST - Free Report) has an Earnings ESP of +3.85% and a Zacks Rank #2. The company is expected to release fourth-quarter 2023 results on Mar 4.
RXST has an expected long-term earnings growth rate of 21%. The company surpassed earnings in each of the trailing four quarters, the average being 18.25%.
Sarepta Therapeutics (SRPT - Free Report) currently has an Earnings ESP of +52.45% and a Zacks Rank #2. The company is expected to release its fourth-quarter 2023 results on Feb 27.
SRPT has an expected earnings growth rate of 132.6% compared to the industry’s 11.1%. In the last reported quarter, the company delivered an earnings surprise of 72.3%.
Image: Bigstock
CVS Health (CVS) to Report Q4 Earnings: What's in the Cards?
CVS Health Corporation (CVS - Free Report) is scheduled to report fourth-quarter 2023 results on Feb 7 before the opening bell.
In the last reported quarter, the company’s adjusted earnings of $2.21 exceeded the Zacks Consensus Estimate by 3.76%. The company beat estimates in the trailing four quarters, the average surprise being 4.49%.
Let’s look at how things have shaped for CVS Health before this announcement.
Factors at Play
Health Care Benefits
The segment is likely to have witnessed a robust performance in the fourth quarter of 2023, backed by growth across multiple product lines. Medical membership may have increased significantly compared to the prior year, driven by increases in the individual exchange, Medicare and commercial businesses.
Medicare Advantage is a key strategic growth area for CVS’ business. Earlier, the company demonstrated significant progress in restoring its member experience ratings, which may have helped the company navigate some of the emerging Medicare Advantage medical cost pressures in the fourth quarter of 2023. Also, CVS may have continued to experience elevated utilization trends in the Medicare Advantage business, primarily in outpatient and supplemental benefits such as dental, behavioral health, OTC and flex card.
CVS Health Corporation Price and EPS Surprise
CVS Health Corporation price-eps-surprise | CVS Health Corporation Quote
The company launched its wholly owned subsidiary, Cordavis, in the third quarter of 2023, which will work directly with pharmaceutical manufacturers to commercialize and co-produce high-quality biosimilar products. In the fourth quarter of 2023, CVS is expected to have capitalized on the multi-billion dollar biosimilar market in the United States by bringing about a portfolio of biosimilar products to the market and allowing significant long-term savings potential available through biosimilars. This development is likely to have boosted the company’s revenues in the to-be-reported quarter.
Going by the Zacks Consensus Estimate, CVS’ Health Care Benefits arm revenues are likely to have improved 11.3% sequentially in the fourth quarter of 2023.
Health Services
In the fourth quarter of 2023, the segment is likely to have reflected continued momentum, backed by the impressive performance in the pharmacy services business. CVS may have consistently demonstrated value to consumers and clients by successfully managing drug cost trends and bringing innovative clinical solutions to the market.
In addition, the pharmacy drug mix, growth in specialty pharmacy, brand inflation and the addition of Signify and Oak Street may have also favorably impacted the company’s revenues in the to-be-reported quarter. CVS may have further progressed on its initiatives to create integrated health experiences across multiple channels, including Aetna, Signify, CVS Retail Health and CVS Pharmacy. For Signify Health, CVS is likely to have succeeded in connecting more CVS Pharmacy patients to Signify for in-home evaluation and other services in the home. All these efforts are expected to have a positive impact on the company’s revenues in the fourth quarter of 2023.
Pharmacy & Consumer Wellness
Across this division, the impact of the pharmacy drug mix, increased prescriptions and brand inflation are likely to have helped CVS deliver increased revenues in the fourth quarter of 2023. We assume the retail pharmacy business to have strongly performed. Same-store pharmacy sales are also likely to have been driven by the drug mix, an increase in same-store prescription volumes and brand inflation. Excluding the COVID-19 impact, same-store prescription volumes are also likely to have grown modestly in the to-be-reported quarter.
In terms of the consumer engagement strategy, CVS might have significantly expanded its digital reach with more customers, backed by its customer-focused innovations and relevant experiences. The company’s strong digital engagement and enhanced capabilities are likely to have helped strengthen its ability to drive seasonal flu, COVID-19 and RFD immunization awareness and connect patients to the CVS locations for these important health services. All these developments are likely to have benefitted the company’s revenues in the fourth quarter of 2023.
However, continued reimbursement pressure, the impact of recent generic introductions, a decrease in the store count, and decreased COVID-19-related volumes might have partially dented the segment’s improvement rate in the to-be-reported quarter, thus affecting the results of operations.
Key Q4 Estimates
The Zacks Consensus Estimate for fourth-quarter 2023 adjusted earnings of $1.98 per share suggests a 0.5% fall from the year-ago reported figure.
The consensus estimate for revenues is pegged at $90.25 billion, calling for a 7.6% rise from the prior-year reported number.
What Our Model Suggests
Per our proven model, stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), along with a positive Earnings ESP, have a higher chance of beating estimates, which is the case below:
Earnings ESP: CVS Health has an Earnings ESP of +1.40%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #2.
Other Stocks Worth a Look
Here are some other medical stocks worth considering as these also have the right combination of elements to post an earnings beat this quarter:
Abbott Laboratories (ABT - Free Report) has an Earnings ESP of +1.68% and a Zacks Rank #2. The company is expected to release its fourth-quarter 2023 results on Jan 24. You can see the complete list of today’s Zacks #1 Rank stocks here.
ABT has an earnings yield of 4.03% compared to the industry’s -0.62%. ABT surpassed earnings in each of the trailing four quarters, the average being 6.76%.
RxSight (RXST - Free Report) has an Earnings ESP of +3.85% and a Zacks Rank #2. The company is expected to release fourth-quarter 2023 results on Mar 4.
RXST has an expected long-term earnings growth rate of 21%. The company surpassed earnings in each of the trailing four quarters, the average being 18.25%.
Sarepta Therapeutics (SRPT - Free Report) currently has an Earnings ESP of +52.45% and a Zacks Rank #2. The company is expected to release its fourth-quarter 2023 results on Feb 27.
SRPT has an expected earnings growth rate of 132.6% compared to the industry’s 11.1%. In the last reported quarter, the company delivered an earnings surprise of 72.3%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.