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Why Is CVS Health (CVS) Down 1.2% Since Last Earnings Report?
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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 1.2% in that time frame, outperforming 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 Beat Estimates, Margins Up
CVS Health’s fourth-quarter 2021 adjusted earnings per share of $1.98 rose 52.3% year over year and exceeded the Zacks Consensus Estimate by 2.1%. The adjusted EPS figure considers certain asset amortization costs, acquisition-related integration costs and other adjustments.
On a reported basis, the company’s earnings of 98 cents rose 30.7% year over year.
Full-year earnings per share was $8.40, up 12% from the year-ago number. The metric surpassed the Zacks Consensus Estimate by 0.5%.
Total revenues in the fourth quarter rose 10.1% year over year to $76.60 billion. The top line also beat the Zacks Consensus Estimate by 0.8%.
Full-year revenues were $292.11 billion, reflecting an 8.7% increase from the year-ago period. Revenues also surpassed the Zacks Consensus Estimate by 0.2%.
Quarter in Detail
Pharmacy Services revenues were up 8.2% to $39.34 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 price compression.
Total pharmacy claims processed rose 8.2% on a 30-day equivalent basis, attributable to strong net new business, COVID-19 vaccinations and increased new therapy prescriptions. Without considering the COVID-19 vaccinations, total pharmacy claims processed increased 5.4% on a 30-day equivalent basis.
Revenues from CVS Health’s Retail/LTC segment were up 12.7% year over year to $27.11 billion. In the quarter, the benefit from the administration of COVID-19 vaccinations and diagnostic testing, increased prescription and front store volumes were partially offset by continued pharmacy reimbursement pressure and the impact of recent generic introductions.
Within Health Care Benefits segment, the company registered revenues worth $20.69 billion in the fourth quarter, up 8.4% year over year. The improvement was primarily driven by growth in the Government Services business, partially offset by the unfavorable impact of the repeal of the HIF (Health Insurer Fee) for 2021 and the absence of the ACA risk corridor receipt.
Margin
Total cost (including Benefit Cost) rose 9.3% to $62.95 billion in the fourth quarter. Gross profit rose 14.2% to $13.65 billion. Gross margin expanded 63 basis points (bps) to 17.8%. Operating margin in the quarter under review expanded 105 bps to 4.7%, with a 42.1% rise in operating profit to $3.59 billion.
2022 Guidance
CVS Health confirmed its full-year 2022 earnings per share guidance, which was earlier announced in December 2022.
The company confirmed that adjusted earnings per share is expected in the band of $8.10-$8.30. The Zacks Consensus Estimate for 2021 earnings is pegged at $8.24.
Full-year operating cash flow projection has been revised to the range of $12.00-$13.00 billion (from $12.50-$13.00 billion).
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
At this time, CVS Health has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. 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 trending upward for the stock, and the magnitude of these revisions looks promising. 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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Why Is CVS Health (CVS) Down 1.2% Since Last Earnings Report?
It has been about a month since the last earnings report for CVS Health (CVS - Free Report) . Shares have lost about 1.2% in that time frame, outperforming 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 Beat Estimates, Margins Up
CVS Health’s fourth-quarter 2021 adjusted earnings per share of $1.98 rose 52.3% year over year and exceeded the Zacks Consensus Estimate by 2.1%. The adjusted EPS figure considers certain asset amortization costs, acquisition-related integration costs and other adjustments.
On a reported basis, the company’s earnings of 98 cents rose 30.7% year over year.
Full-year earnings per share was $8.40, up 12% from the year-ago number. The metric surpassed the Zacks Consensus Estimate by 0.5%.
Total revenues in the fourth quarter rose 10.1% year over year to $76.60 billion. The top line also beat the Zacks Consensus Estimate by 0.8%.
Full-year revenues were $292.11 billion, reflecting an 8.7% increase from the year-ago period. Revenues also surpassed the Zacks Consensus Estimate by 0.2%.
Quarter in Detail
Pharmacy Services revenues were up 8.2% to $39.34 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 price compression.
Total pharmacy claims processed rose 8.2% on a 30-day equivalent basis, attributable to strong net new business, COVID-19 vaccinations and increased new therapy prescriptions. Without considering the COVID-19 vaccinations, total pharmacy claims processed increased 5.4% on a 30-day equivalent basis.
Revenues from CVS Health’s Retail/LTC segment were up 12.7% year over year to $27.11 billion. In the quarter, the benefit from the administration of COVID-19 vaccinations and diagnostic testing, increased prescription and front store volumes were partially offset by continued pharmacy reimbursement pressure and the impact of recent generic introductions.
Within Health Care Benefits segment, the company registered revenues worth $20.69 billion in the fourth quarter, up 8.4% year over year. The improvement was primarily driven by growth in the Government Services business, partially offset by the unfavorable impact of the repeal of the HIF (Health Insurer Fee) for 2021 and the absence of the ACA risk corridor receipt.
Margin
Total cost (including Benefit Cost) rose 9.3% to $62.95 billion in the fourth quarter. Gross profit rose 14.2% to $13.65 billion. Gross margin expanded 63 basis points (bps) to 17.8%. Operating margin in the quarter under review expanded 105 bps to 4.7%, with a 42.1% rise in operating profit to $3.59 billion.
2022 Guidance
CVS Health confirmed its full-year 2022 earnings per share guidance, which was earlier announced in December 2022.
The company confirmed that adjusted earnings per share is expected in the band of $8.10-$8.30. The Zacks Consensus Estimate for 2021 earnings is pegged at $8.24.
Full-year operating cash flow projection has been revised to the range of $12.00-$13.00 billion (from $12.50-$13.00 billion).
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
At this time, CVS Health has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. 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 trending upward for the stock, and the magnitude of these revisions looks promising. Notably, CVS Health has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.