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Why Is CVS Health (CVS) Up 1.6% Since Last Earnings Report?
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A month has gone by since the last earnings report for CVS Health (CVS - Free Report) . Shares have added about 1.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is CVS Health due for a pullback? 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's Q1 Earnings Miss Estimates, Margins Up
CVS Health posted adjusted earnings per share (EPS) of $1.31 in first-quarter 2024, down 40.5% year over year. The metric also missed the Zacks Consensus Estimate by 22.5%. The adjusted EPS figure considers certain asset amortization costs, loss on assets held for sale and other adjustments.
On a reported basis, the company’s GAAP earnings were 88 cents compared with the year-ago GAAP EPS of $1.65, down 46.7%.
Revenues
Revenues in the first quarter rose 3.7% year over year to $88.44 billion. However, the top line missed the Zacks Consensus Estimate by 0.9%. The year-over-year upside reflects strong growth in the Health Care Benefits and Pharmacy & Consumer Wellness segments.
Quarter in Detail
Health Services revenues were down 9.7% to $40.29 billion in the reported quarter. The downside was due to the previously-announced loss of a large client during the first quarter and continued pharmacy client price improvements.
The downside was partially offset by the pharmacy drug mix, growth in specialty pharmacy and the acquisitions of Oak Street Health and Signify Health. Total pharmacy claims processed declined 21.2% on a 30-day equivalent basis, driven by the loss of a large number of clients during first-quarter 2024.
Revenues in CVS Health’s Pharmacy & Consumer Wellness segment were up 2.9% year over year to $28.73 billion. The upside was primarily driven by increased prescription volume, including increased contributions from vaccinations and pharmacy drug mix.
Within the Health Care Benefits segment, the company registered revenues worth $32.24 billion in the first quarter, up 24.6% year over year. The upside was driven by growth in the Medicare and Commercial product lines.
Margin
Total costs fell 6.6% to $48.07 billion in the first quarter. Gross profit rose 19.3% to $40.36 billion. The gross margin expanded 598 basis points (bps) to 45.6%.
The adjusted operating margin in the quarter under review expanded 558 bps to 34% despite a 7.4% rise in operating expenses to $10.29 billion.
Liquidity Position
CVS Health exited the first quarter of 2024 with cash and cash equivalents of $9.80 billion compared with $8.19 billion at the end of fourth-quarter 2023. The long-term debt was $57.69 billion at the end of the first quarter of 2024 compared with $58.64 billion at the end of the fourth quarter.
The cumulative net cash provided by operating activities at the end of the first quarter of 2024 was $4.90 billion compared with $7.44 billion in the year-ago period.
2024 Guidance
Acknowledging the likelihood that rising medical cost trends will persist for the rest of 2024, CVS Health updated EPS guidance for 2024.
The company expects adjusted EPS guidance for full-year 2024 to be at least $7.00 (down from the previous guidance of at least $8.30). The Zacks Consensus Estimate for 2024 earnings is pegged at $8.31.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -17.76% due to these changes.
VGM Scores
At this time, CVS Health has a great 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise CVS Health has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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Why Is CVS Health (CVS) Up 1.6% Since Last Earnings Report?
A month has gone by since the last earnings report for CVS Health (CVS - Free Report) . Shares have added about 1.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is CVS Health due for a pullback? 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's Q1 Earnings Miss Estimates, Margins Up
CVS Health posted adjusted earnings per share (EPS) of $1.31 in first-quarter 2024, down 40.5% year over year. The metric also missed the Zacks Consensus Estimate by 22.5%. The adjusted EPS figure considers certain asset amortization costs, loss on assets held for sale and other adjustments.
On a reported basis, the company’s GAAP earnings were 88 cents compared with the year-ago GAAP EPS of $1.65, down 46.7%.
Revenues
Revenues in the first quarter rose 3.7% year over year to $88.44 billion. However, the top line missed the Zacks Consensus Estimate by 0.9%. The year-over-year upside reflects strong growth in the Health Care Benefits and Pharmacy & Consumer Wellness segments.
Quarter in Detail
Health Services revenues were down 9.7% to $40.29 billion in the reported quarter. The downside was due to the previously-announced loss of a large client during the first quarter and continued pharmacy client price improvements.
The downside was partially offset by the pharmacy drug mix, growth in specialty pharmacy and the acquisitions of Oak Street Health and Signify Health.
Total pharmacy claims processed declined 21.2% on a 30-day equivalent basis, driven by the loss of a large number of clients during first-quarter 2024.
Revenues in CVS Health’s Pharmacy & Consumer Wellness segment were up 2.9% year over year to $28.73 billion. The upside was primarily driven by increased prescription volume, including increased contributions from vaccinations and pharmacy drug mix.
Within the Health Care Benefits segment, the company registered revenues worth $32.24 billion in the first quarter, up 24.6% year over year. The upside was driven by growth in the Medicare and Commercial product lines.
Margin
Total costs fell 6.6% to $48.07 billion in the first quarter. Gross profit rose 19.3% to $40.36 billion. The gross margin expanded 598 basis points (bps) to 45.6%.
The adjusted operating margin in the quarter under review expanded 558 bps to 34% despite a 7.4% rise in operating expenses to $10.29 billion.
Liquidity Position
CVS Health exited the first quarter of 2024 with cash and cash equivalents of $9.80 billion compared with $8.19 billion at the end of fourth-quarter 2023. The long-term debt was $57.69 billion at the end of the first quarter of 2024 compared with $58.64 billion at the end of the fourth quarter.
The cumulative net cash provided by operating activities at the end of the first quarter of 2024 was $4.90 billion compared with $7.44 billion in the year-ago period.
2024 Guidance
Acknowledging the likelihood that rising medical cost trends will persist for the rest of 2024, CVS Health updated EPS guidance for 2024.
The company expects adjusted EPS guidance for full-year 2024 to be at least $7.00 (down from the previous guidance of at least $8.30). The Zacks Consensus Estimate for 2024 earnings is pegged at $8.31.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -17.76% due to these changes.
VGM Scores
At this time, CVS Health has a great 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise CVS Health has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.