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CVS Health (CVS) Q4 Earnings Beat Estimates, Margins Up

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CVS Health Corporation's CVS fourth-quarter 2021 adjusted earnings per share (EPS) 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 EPS 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.

CVS Health Corporation Price, Consensus and EPS Surprise

CVS Health Corporation Price, Consensus and EPS Surprise
CVS Health Corporation Price, Consensus and EPS Surprise

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

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 EPS guidance, which was earlier announced in December 2021.

The company confirmed that adjusted EPS 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).

Our Take

CVS Health’s fourth-quarter earnings and revenues surpassed the Zacks Consensus Estimate. Revenues across all the three operating segments improved in the reported quarter. The company administered more than 8 million COVID-19 tests and more than 20 million COVID-19 vaccines nationwide in the fourth quarter of 2021. During the reported quarter, the company unveiled several steps to support the acceleration of its omnichannel health strategy, including creating new store formats and optimizing its retail footprint to align with evolving customer needs. However, the rise in operating costs is building pressure on the bottom line.

Zacks Rank and Other Key Picks

CVS Health currently carries a Zacks Rank #2 (Buy).

Here are a few other stocks worth considering, as these have the right combination of elements to beat on earnings this reporting cycle.

AMN Healthcare Services, Inc. AMN has an Earnings ESP of +10.29% and a Zacks Rank of #1 (Strong Buy). AMN Healthcare is slated to release fourth quarter and full-year 2021 results on Feb 17. You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare’s long-term earnings growth rate is estimated at 16.2%. AMN’s earnings yield of 6.5% compares favorably with the industry’s 0.9%.

Allscripts Healthcare Solutions, Inc. MDRX has an Earnings ESP of +10.11% and a Zacks Rank of #2. Allscripts will release fourth quarter and full-year 2021 results on Feb 24.

Allscripts’ long-term earnings growth rate is estimated at 11.1%. MDRX’s earnings yield of 5% compares favorably with the industry’s (4.9%).

Henry Schein, Inc. HSIC has an Earnings ESP of +1.94% and a Zacks Rank of 2. The company will report fourth quarter and full-year 2021 results on Feb 15.

Henry Schein’s long-term earnings growth rate is estimated at 11.8%. HSIC’s earnings yield of 6.2% compares favorably with the industry’s 4.3%.


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