CVS Health (CVS) Outlines Growth Strategy, Initiates 2022 View
CVS Health Corporation CVS recently outlined its long-term growth strategy at its 2021 Investor Day, aiming at capitalizing on the significant market opportunity to make health care more convenient, personalized and affordable for consumers. Apart from providing better visibility into its near-and long-term financial performance expectations, the company has initiated its full-year 2022 financial guidance.
Per CVS Health’s management, by focusing on high-growth foundational businesses and expanding the company’s reach in areas like health services and primary care, CVS Health has an opportunity to transform health care to be more centered on consumers while capturing a meaningfully greater portion of health care spend. The company will also continue to carefully manage its balance sheet while deploying capital against growth areas such as capability-focused M&A targets to accelerate company’s vision.
Key Areas for Strategic Growth
CVS Health will maximize growth in the company’s foundational businesses by continuing to position its existing assets to offer market-leading health solutions and focusing on high-growth opportunities. The company will also advance primary care delivery capabilities by guiding consumers across the care continuum to sites and providers that meet their requirements in person and virtually.
The company will optimize the retail portfolio to serve as community health destinations by closing nearly 900 stores over the next three years to reduce store density and ensure it has the right kinds of stores in the right locations for consumers and the business.
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Moreover, CVS Health is driving a digital-first, technology-forward approach that will expand the company’s reach and engagement with its more than 35 million online members. The company will also enhance omnichannel health services to meet the needs of consumers as and when required.
2021 Guidance Narrowed
For 2021, the company projects total revenues of at least $290.30 billion, narrowed from the prior-announced range of $286.5-$290.3 billion. The Zacks Consensus Estimate for the same is pegged at $289.85 billion.
The company’s adjusted earnings per share (EPS) is expected to be at least $8.00 versus the prior range of $7.90 to $8.00. The Zacks Consensus Estimate for the same is pegged at $7.97.
Cash flow from operations is expected to be at least $13.50 billion versus the prior range of $13.00 to $13.50 billion.
2022 Guidance Initiated
CVS Health also presented a detailed 2022 financial outlook, capital allocation strategy and long-term outlook and growth targets. As part of its long-term growth trajectory, CVS Health targets a return to low double-digit adjusted EPS growth in 2024 and beyond.
For 2022, the company projects total revenues in the range of $304.00-$309.00 billion. The Zacks Consensus Estimate for the same is pegged at $303.11 billion.
Adjusted EPS is expected in the range of $8.10-$8.30. The Zacks Consensus Estimate for the same is pegged at $8.22.
Cash flow from operations is projected in the range of $12.50 to $13.00 billion.
Additionally, the company will increase its yearly dividend by 10%, from $2.00 to $2.20, effective Feb 1, 2022.
Price Performance
Shares of the company have gained 41.5% in a year’s time compared with the industry’s rise of 32.7%.
Zacks Rank and Key Picks
CVS Health currently carries a Zacks Rank #3 (Hold).
A couple of better-ranked stocks from the broader medical space are Thermo Fisher Scientific Inc. TMO, Laboratory Corporation of America Holdings LH, or LabCorp and Medpace Holdings, Inc. MEDP. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Thermo Fisher, currently carrying a Zacks Rank #2 (Buy), reported third-quarter 2021 adjusted EPS of $5.76, which surpassed the Zacks Consensus Estimate by 23.3%. Revenues of $9.33 billion outpaced the Zacks Consensus Estimate by 12%.
Thermo Fisher has an estimated long-term growth rate of 14%. TMO surpassed estimates in the trailing four quarters, the average surprise being 9.02%.
LabCorp, carrying a Zacks Rank #2, reported third-quarter 2021 adjusted EPS of $6.82, which surpassed the Zacks Consensus Estimate by 42.9%. Revenues of $4.06 billion outpaced the Zacks Consensus Estimate by 13.4%.
LabCorp has an estimated long-term growth rate of 10.6%. LH surpassed estimates in the trailing four quarters, the average surprise being 25.7%.
Medpace reported third-quarter 2021 adjusted EPS of $1.29, surpassing the Zacks Consensus Estimate by 20.6%. Revenues of $295.57 million beat the Zacks Consensus Estimate by 1.2%.
Medpace has an estimated long-term growth rate of 16.4%. MEDP surpassed estimates in the trailing four quarters, the average surprise being 11.9%. It currently sports a Zacks Rank #2.
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