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Can All-Line Growth Aid CVS Health's (CVS) Earnings in Q2?

Zacks Equity Research

CVS Health Corporation CVS is scheduled to report second-quarter 2019 results on Aug 7, before the opening bell. In the last reported quarter, the company delivered a positive surprise of 8%, the average trailing four-quarter beat being 4.38%.

Let’s take a look at how things are shaping up prior to this announcement.

Factors at Play

Within Pharmacy Services, despite a tough pricing competition, CVS Health has been gaining on high level of service and execution, competitive pricing and a unique integrated model. This, in turn, might have a bearing on the company’s second-quarter results. Within PBM, the company’s new guaranteed net cost pricing model is garnering interest from clients and benefit consultants, which could lead to client adoptions in the second quarter.

CVS Health Corporation Price and EPS Surprise

CVS Health Corporation Price and EPS Surprise

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

Turning to the Health Care Benefits segment, the company expects to see government programs gaining momentum, driven by industry-leading Medicare growth and the key Medicaid wins.

This newly-incorporated business has already started to register top-line contributions for the company. In the first quarter, this segment had posted significant Medicare Advantage membership growth, particularly in the government space. SilverScript Medicare Part D business is also registering a strong revenue performance. This should further get reflected in second-quarter earnings report.

However, this segment might suffer in anticipation that certain one-time benefits realized by Aetna in 2018 are not likely to recur in 2019. This, in turn, could affect the segment in the June quarter.

Within the Retail/Long-Term Care Segment, CVS Health is likely to thrive on the back of consistently solid adjusted script growth owing to the steady success of the pharmacy clinical care program that improved patient retention. Additionally, CVS Health projects an uptick in the recently-formed Medicare partnerships and the new regional preferred alliances forged in the ongoing year. The continued uptake of the company’s Patient Care Programs in collaboration with PBM and its preferred status in a number of Medicare Part D networks are expected to drive the second-quarter top line.

Here is What the Quantitative Model Predicts:

The proven Zacks model shows that a company with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has maximum chances of beating estimates if it also has a positive Earnings ESP.

CVS Health has a Zacks Rank #3, which increases the predictive power of ESP. Moreover, its Earnings ESP of +9.89% n the combination indicates a likely positive surprise for the stock this earnings season.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Meanwhile, the Zacks Consensus Estimate for second-quarter adjusted EPS of $1.70 suggests a 0.59% rise from the year-ago reported figure.

Other Stocks Worth a Look

Here are a few other medical stocks worth considering as these too have the right mix of elements to exceed expectations this reporting cycle.

Bio-Techne Corporation TECH has an Earnings ESP of +1.27% and is Zacks #2 Ranked. You can see the complete list of today’s Zacks #1 Rank stocks here.

Anavex Life Sciences Corp. AVXL has an Earnings ESP of +4.00% and a Zacks Rank #2.

Allena Pharmaceuticals, Inc. ALNA has an Earnings ESP of +7.55% and a Zacks Rank of 3.

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