The broader market average all closed at record highs on Friday, as U.S. stocks added to recent gains this week. Financial names led the way higher, while real estate and utility stocks trailed the market.
Investors kept a close eye on trade talks between the U.S. and China this week. While a formal resolution has yet to be announced, multiple press reports suggested the two sides could announce a “Phase One” deal before the next set of tariffs are scheduled to take effect, on Dec. 15.
Earnings Parade Ending
Third-quarter earnings season effectively ended this week, as 446 companies in the S&P 500 index have now announced results. 74% of the names have exceeded expectations, which is above the historical average. On the other hand, aggregate profit is on track to decline 0.5% for the period.
Kroger (KR) was the big earnings-related winner this week. The grocery retailer gained 11% a session after providing upbeat profit guidance. On the other hand, online travel names Expedia (EXPE) and TripAdvisor (TRIP) both lost more than 20% a day after disappointing the market with their respective quarterly results.
Looking ahead to next week, Cisco Systems (CSCO), Viacom (VIAB) and Wal-Mart (WMT) are scheduled to post quarterly reports. The bond markets are closed on Nov. 9 for the Veterans Day holiday and the economic calendar will be relatively quiet next week.
Knowing what and when to buy can be challenging for any investor. However, the fact remains that attractive investments are out there, if you’re willing to dig a little deeper.
One such consumer name with strong earnings momentum is worth a closer look and is our Stock of the Week below…
Stock of the Week: CVS Health (CVS)
The company is probably best known for its portfolio of nearly 10,000 retail pharmacies, but acquisitions over the past several years have broadened its business portfolio.
CVS Health provides medical insurance to 38 million users through Aetna and covers pharmacy benefits for 102 million customers, by way of Caremark. In addition, the company treats patients directly through its network of over 1,100 Minute Clinics.
The stock gained nearly 8% this week, as management delivered better-than-expected quarterly results on Wednesday.
Looking ahead, these gains should keep on coming. Here’s why:
The retailer earned $1.84 a share in the third quarter, as revenue increased 36% from the previous year, to $64.81 billion. The sales growth was primarily from the Aetna acquisition, which is approaching its first anniversary. Management said on the conference call that all of the company’s core businesses grew at or above plan in the period.
“In our view, CVS is executing on its strategy to integrate medical and pharmacy offerings to drive differentiation in the marketplace, through efforts such as HealthHUB expansion. Over time, we believe this should drive continued share gains and improvement in operating performance across the company's business units. As the company executes on these initiatives, share valuation should expand from current levels.”
CVS Health generates steady cash flow, which it returns to investors. The shares offer a quarterly dividend of $0.25 a share (1.4% yield). Management also paid down $2.9 billion of net debt in the most recent quarter.
In the meantime, the company is attractively priced at just 10.1x expected full-year earnings of $7.21 a share. This is an 11% discount to the median industry value and well below the average market multiple.
It’s also worth noting that CVS Health carries a Smart Score of 10/10 on TipRanks. This new proprietary metric utilizes Big Data to rank stocks based on 8 key factors that have historically been a precursor of future outperformance.
On top of the positive aspects mentioned already, Smart Score says the company has seen positive sentiment from investment bloggers and news.
FYI: This is just 1 of the 20+ stocks selected for the Smart Investor portfolio. That’s where we share more detailed insights on our weekly stock picks. You may also want to learn more about how we use TipRanks indicators to find stocks that are primed to outperform. (Discover the Smart Investor portfolio here)