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Can Pharmacy Services Drive CVS Health's (CVS) Q3 Earnings?

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CVS Health Corporation’s (CVS - Free Report) Pharmacy Services business has been gaining momentum on the back of higher specialty pharmacy and pharmacy network claim volumes besides brand inflation.

We expect this strength to get reflected in third-quarter 2019 results, which are scheduled for release on Nov 6, before market open.

Click here to know how the company is likely to perform in the quarter to be reported.

Pharmacy Services Segment in Focus

Consistent with the prior quarters, net new business and the continued adoption of Maintenance Choice programs are once again expected to have driven CVS’ PBM business in the third quarter. Strong claims volume and favourable purchasing economics are once again expected to have boosted the top line. The company’s new guaranteed net cost pricing model is drawing clients and benefit consultants’ attention, which is likely to have led to client uptakes in the third quarter.

CVS Health Corporation Price and EPS Surprise

CVS Health Corporation Price and EPS Surprise

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

Caremark legacy business is also expected to have delivered a strong quarter, banking on the company’s solid execution of its formulary and cost-management tools. In terms of unit cost, the company is successful in driving down the average out-of-pocket costs for plan members over the sixth consecutive year, retaining patients’ adherence and improving their overall health. This trend has most likely continued in the third quarter as well.

Last but not the least, the company earlier noted that post the Aetna acquisition, its Pharmacy Services segment's current-year figures might be affected by two important changes. Firstly, due to the shift of the company’s Individual SilverScript PDP from the PBM segment to its newly-formed Health Care Benefits (HCB) unit. Secondly, the company already integrated the pharmacy operations of Aetna into its PBM. We therefore expect these factors to impact the yet-to-be-reported quarter’s top-line results.

Zacks Ranks and Key Picks

CVS Health currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DENTSPLY SIRONA (XRAY - Free Report) has an Earnings ESP of +5.05% and a Zacks Rank of 3.

AmerisourceBergen Company (ABC - Free Report) has an Earnings ESP of +0.55% and is Zacks #3 Ranked.

Cardinal Health, Inc. (CAH - Free Report) has an Earnings ESP of +0.69% and is a #3 Ranked stock. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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