CVS Health (CVS) to Report Q3 Earnings: What's in the Cards?
CVS Health Corporation CVS is scheduled to report third-quarter 2022 results on Nov 2, before the opening bell.
In the last reported quarter, the company’s adjusted earnings of $2,40 exceeded the Zacks Consensus Estimate by 11.11%. The company beat estimates in the trailing four quarters, the average surprise being 6.74%.
Let’s take a look at how things have shaped up prior to this announcement.
Factors at Play
CVS Health’s retail/long-term care (LTC) segment is likely to have benefited from the enhanced pharmacy and front-store sales growth, similar to the second quarter. With economies reopening and infectious diseases still existing, the segment is likely to have witnessed continued sales of COVID-19 OTC test kits in the to-be-reported quarter. The retail segment has also been gaining from strength in paid membership programs. The company’s efforts to optimize the retail portfolio, which now consists of three models, including advanced primary care clinics, enhanced health hub locations and traditional CVS pharmacy locations, are likely to have been advantageous for upcoming Q3 results.
Added to this, the company’s omnichannel approach is expected to have driven consumer satisfaction levels and enabled CVS Health to attract and retain customers in Q3.
However, we expect this sales performance to have been impacted by lower demand for COVID-19 over-the-counter (OTC) test kits and vaccines due to a significant drop in COVID severity in the United States.
CVS Health has been making noteworthy progress in terms of expanding access to care through digital and virtual channels. Per the August 2022 update, over 60% of its newly acquired digital users are customers of specialty, mail-order, and retail pharmacies. CVS Health’s contained efforts to expand digital health services and deepen engagement through personalization are expected to have broadened its customer base in Q3, thus adding to its top line.
CVS Health Corporation Price and EPS Surprise
CVS Health Corporation price-eps-surprise | CVS Health Corporation Quote
The company’s digital capabilities for health interactions, prescription services and sales of health and wellness products sales are anticipated to have enhanced consumer engagement across all CVS Health businesses.
Our model suggests retail/LTC revenues of $25.05 billion for the third quarter.
The pharmacy services segment is expected to have recorded robust sales growth, banking on increased pharmacy sales and prescriptions filled, especially with the growing uptake of cough and cold and beauty and personal care products. Added to this, growth in specialty pharmacy and brand inflation is also likely to have been a contributing factor in the pharmacy services arm. The company pairs specialty pharmacy programs with digital capabilities to provide customers with a convenient and connected experience while driving value in the marketplace. CVS Health is also leveraging the power of analytics and robotics to automate prescriptions. This would simplify and accelerate the process of filling prescriptions, benefitting the business performance.
Our model projects pharmacy services revenues of $40.91 billion for the third quarter.
The healthcare benefits arm is likely to have been driven by sustained membership growth across all product lines. The Medicare franchise, particularly, has been delivering strong results for the company in the past years. We expect this growth momentum to continue, driving growth in the to-be-reported quarter. We also anticipate increased government memberships to have contributed to the segment’s top line. Further, CVS Health’s competitive cost structure, integrated benefit designs and innovative product portfolio position the healthcare benefits business for further growth.
Per our model, the healthcare benefits segment is likely to deliver Q3 sales of $21.95 billion.
Key Q3 Estimates
The Zacks Consensus Estimate for third-quarter adjusted earnings of $1.99 per share implies a 1% rise from the year-ago reported figure. Our estimate for Q3 is $1.97.
The Zacks Consensus Estimate for revenues is pegged at $76.53 billion, suggesting 3.7% growth from the prior-year reported number. Our model projects revenues of $76.87 billion for Q3.
What Our Model Suggests
Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has higher chances of beating estimates. However, this is not the case here, as you can see:
Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #3.
Stocks Worth a Look
Here are a few stocks worth considering, as these have the right combination of elements to beat on earnings this reporting cycle.
Chimerix CMRX has an Earnings ESP of +33.81% and a Zacks Rank of #2. The company will release third-quarter 2022 results on Nov 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Chimerix’s earnings yield of 112.3% compares favorably with the industry’s -2.98%.
McKesson MCK has an Earnings ESP of +0.27% and a Zacks Rank of #2. McKesson is scheduled to release third-quarter 2022 results on Nov 1.
McKesson’s long-term historical earnings growth rate is estimated at 14.2%. MCK’s earnings yield of 6.77% compares favorably with the industry’s 5.19%.
Humana HUM currently has an Earnings ESP of +1.12% and a Zacks Rank of #2. Humana is slated to release third-quarter 2022 results on Nov 2.
Humana’s long-term historical earnings growth rate is estimated at 16.2%. HUM’s earnings yield of 5% is in line with the industry.
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