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CVS Health (CVS) Outpaces Stock Market Gains: What You Should Know

Zacks Equity Research

In the latest trading session, CVS Health (CVS) closed at $54.18, marking a +0.22% move from the previous day. This move outpaced the S&P 500's daily gain of 0.11%. Elsewhere, the Dow lost 0.32%, while the tech-heavy Nasdaq added 0.19%.

Prior to today's trading, shares of the drugstore chain and pharmacy benefits manager had gained 3.25% over the past month. This has lagged the Retail-Wholesale sector's gain of 3.62% and the S&P 500's gain of 3.84% in that time.

Investors will be hoping for strength from CVS as it approaches its next earnings release, which is expected to be May 1, 2019. On that day, CVS is projected to report earnings of $1.52 per share, which would represent year-over-year growth of 2.7%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $60.49 billion, up 32.39% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $6.83 per share and revenue of $251.64 billion. These totals would mark changes of -3.53% and +29.65%, respectively, from last year.

Investors should also note any recent changes to analyst estimates for CVS. These recent revisions tend to reflect the evolving nature of short-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. The Zacks Consensus EPS estimate has moved 0.02% higher within the past month. CVS is holding a Zacks Rank of #4 (Sell) right now.

Digging into valuation, CVS currently has a Forward P/E ratio of 7.92. Its industry sports an average Forward P/E of 12.58, so we one might conclude that CVS is trading at a discount comparatively.

Investors should also note that CVS has a PEG ratio of 1.05 right now. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. The Retail - Pharmacies and Drug Stores was holding an average PEG ratio of 1.01 at yesterday's closing price.

The Retail - Pharmacies and Drug Stores industry is part of the Retail-Wholesale sector. This group has a Zacks Industry Rank of 230, putting it in the bottom 10% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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