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What to Expect from CVS' Q1 Earnings After Walgreens Stock Tanks

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CVS Health (CVS - Free Report) stock has been down in the dumps for years and shares have already fallen 20% in 2019 even as the broader market booms. Now, after Walgreens Boots Alliance’s (WBA - Free Report) massive one-day, post-earnings selloff Tuesday, it’s time to see what investors should expect from CVS.

Quick Walgreens Overview

Walgreens shares plummeted nearly 13% Tuesday after it posted lower-than-projected quarterly earnings results. The nation's largest drugstore chain did report 4.6% revenue expansion, but Walgreens’ executives lowered the company’s full-year fiscal 2019 EPS guidance to flat, from its previous guidance that called for 7% to 12% growth.

Wall Street was likely shocked by the massive reduction in its earnings forecast. The company blamed market challenges and macro trends for its “most difficult quarter” since the formation of Walgreens Boots Alliance more than four years ago. CEO Stefano Pessina pointed to reimbursement pressure, lower generic deflation, along with “continued consumer market challenges in the U.S. and UK” in prepared remarks.

CVS stock fell 3.80% on Tuesday to hit $52.13 per share as investors ran away based on Walgreens’ disappointing guidance.

 

 

CVS Outlook & Earnings Trends

Moving on, CVS has prepared to grow amid the current industry headwinds through its roughly $70 billion acquisition of Aetna, which was officially completed in November 2018. Therefore, the new firm could end up becoming a larger player in a healthcare environment that seems likely to feature more virtual medical checkups and hyper-localized care. CVS’ purchase also helps expand its reach as Amazon (AMZN - Free Report) and others venture deeper into the pharmaceutical business.

Looking ahead, CVS’ first quarter fiscal 2019 revenue is projected to surge over 32% to hit $60.49 billion, based on our Zacks Consensus Estimate. Last quarter, the company’s revenues climbed 12.5% to $54.4 billion. Peeking further ahead, the company’s full-year 2019 revenue is expected to jump nearly 30% to reach $251.64 billion. With that said, CVS’ full-year 2020 revenue is projected to climb just 3.7% higher than our 2019 projection.

At the bottom end of the income statement, CVS’ adjusted Q1 earnings are projected to pop 2.7% to reach $1.52 per share. Meanwhile, CVS’ full-year earnings estimate is expected to sink by 3.5%. Investors should also note that the company’s earnings estimate revision trends have moved almost completely in the wrong direction recently. This means at least some analysts are more bearish on CVS’ short-term and longer-term earnings outlook, which is rarely a good sign.

 

 

Bottom Line

CVS is currently a Zacks Rank #4 (Sell) based mostly on its earnings estimate revision activity. Plus, after rival Walgreens’ severely subdued guidance, things could get even worse for CVS in terms of negative estimate revisions. CVS is currently expected to release its first quarter 2019 financial results on May 1.

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