Health and Healthcare

Is CVS Set to Wow Investors With Q4 Earnings Wednesday Morning?

Chris Lange

Published: February 11, 2020 11:20 am

CVS Health Corp. (NYSE: CVS) is set to report its fourth-quarter financial results before the markets open on Wednesday. The drugstore, pharmacy benefits manager and health insurer has faced strong headwinds since last year’s acquisition of health insurer Aetna for nearly $70 billion, but this earnings report could be the turning point.

The consensus estimates are calling for $1.68 in earnings per share (EPS) and $63.97 billion in revenue. The same period of last year reportedly had $2.14 in EPS and $54.42 billion in revenue.

A nod in CVS’s direction by activist investment firm Starboard Value in November could underscore some more potential value to be unlocked. Granted, Starboard was picking up CVS after some recovery in the wake of its 30% drop from the Aetna acquisition.

Starboard’s exact stake in CVS is unreported, but it is believed to be relatively small. The Wall Street Journal also reported at that time that Starboard has held discussions with CVS described as “amicable.”

Analysts have been concerned by the long-term care liabilities that CVS took on with its Aetna acquisition. Rising costs in CVS’s Omnicare long-term care pharmacy business also had kept analysts from lifting their outlooks on the stock, but analysts are mostly positive on the stock now.

What could Starboard be discussing with CVS? One possibility is the CVS plan to build out MinuteClinic walk-in medical clinics at more of its 9,900 locations. The clinics already operate at about 1,100 CVS stores. CVS reports MinuteClinic results in the same bucket in which it reports its long-term pharmacy care business and its online and onsite pharmacies. A little more transparency about where exactly the revenues and profits are coming from would be welcome.

Overall, CVS stock has underperformed the broad markets with a gain of about 13% in the past 52 weeks. In the past quarter alone, the share price is only up 2%.

Here’s what analysts said ahead of the report:

• JPMorgan has an Overweight rating and a $97 price target.
• Raymond James has a Buy rating with a $90 price target.
• Mizuho’s Buy rating comes with an $82 price target.
• UBS Group has a Buy rating with a $78 target price.
• SunTrust Banks has a Buy rating and an $85 price target.
• Citigroup’s Buy rating comes with an $83 price target.

Shares of CVS traded at $73.58 on Tuesday, in a 52-week range of $51.72 to $77.03. The consensus price target is $81.71.