Q3 Earnings Preview for CVS Health (NYSE:CVS)

in EARNINGS/INVESTING IDEAS by

CVS Health Corporation (NYSE:CVS) is scheduled to report Q3 earnings results on November 6, 2020.

The company is expected to report earnings of $1.34/share on revenue of $66.543 billion. The consensus earnings per share (EPS) of $1.34/share is based on a poll of 26 analysts and represents a decline in eps of −27.0% over the same quarter last year, when the company reported earnings of $1.84/share.

The revenue forecast of $66.543 billion based on a poll of 20 analysts implies a year-over-year (YoY) growth in revenue of 2.7%. Last year the company reported $64.81 billion in revenue for the quarter.

Expected to report EPS contraction of −27.0% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $66,542.50 $64,810.00 2.7%
EPS $1.34 $1.84 −27.0%

Earnings Call Trends

Management has been great at managing analyst expectations historically. The company has a perfect record over the last 8 tracked quarters of exceeding earnings guidance.

What are your expectations from CVS Health Corporation for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $1.92 $2.64 37.5% Beat
Q1, 2020 $1.63 $1.91 17.3% Beat
Q4, 2019 $1.69 $1.73 2.6% Beat
Q3, 2019 $1.77 $1.84 4.1% Beat
Q2, 2019 $1.69 $1.89 11.6% Beat
Q1, 2019 $1.51 $1.62 7.6% Beat
Q4, 2018 $2.06 $2.14 3.7% Beat
Q3, 2018 $1.71 $1.73 1.0% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by falling −1.3%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 5, 2020 $64.98 $64.12 −1.3% Decline
May 6, 2020 $61.21 $61.45 0.4% Increase
February 12, 2020 $73.85 $72 −2.5% Decline
November 6, 2019 $67.32 $71.78 6.6% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.61, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.61 implies a 0.5% chance of earnings manipulation.

Fundamentals And Technical Analysis

CVS Health Corporation is currently trading at $56.09/share, up 0.3% for the day. The company is trading at approximately 72.8% of its 52-week high of $77.03/share. The company’s stock price is down −12.5% since the last earnings report and down −6.9% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 35.36 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:CVS Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 8.89 and a forward P/E multiple of 7.69.

CVS Health Corporation’s current share price also implies a price-to-book (P/B) multiple of 1.08. The following table summarizes some other key fundamental ratios:

Data as of November 1, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $56.09
P/E Ratio 8.9x
P/E Ratio (Fwd) 7.7x
PEG Ratio 0.1
Total Debt / Total Capital 55.6%
Levered Free Cash Flow $13.628 billion
EV / EBITDA 7.1x

Finbox

CVS Health Corporation is a large-cap stock with a market capitalization of $73.405 billion and a total enterprise value of $148.3 billion. The company operates in the Healthcare sector and the Healthcare Providers & Services industry.

CVS Health Corporation provides health services and plans in the United States. The company’s Pharmacy Services segment offers pharmacy benefit management solutions, including plan design and administration, formulary management, retail pharmacy network management, mail order pharmacy, specialty pharmacy and infusion, clinical, and disease and medical spend management services. It serves employers, insurance companies, unions, government employee groups, health plans, prescription drug plans (PDPs), Medicaid managed care plans, plans offered on public health insurance and private health insurance exchanges, other sponsors of health benefit plans, and individuals. This segment operates retail specialty pharmacy stores; and specialty mail order, mail order dispensing, and compounding pharmacies, as well as branches for infusion and enteral nutrition services. Its Retail/LTC segment sells prescription and over-the-counter drugs, beauty and personal care products, and cosmetics; and provides health care services through its MinuteClinic walk-in medical clinics. This segment also distributes prescription drugs; and provides related pharmacy consulting and other ancillary services to chronic care facilities and other care settings. As of December 31, 2019, it operated approximately 9,900 retail locations and 1,100 MinuteClinic locations, as well as online retail pharmacy websites, LTC pharmacies, and onsite pharmacies. The company’s Health Care Benefits segment offers traditional, voluntary, and consumer-directed health insurance products and related services. It serves employer groups, individuals, college students, part-time and hourly workers, health plans, health care providers, governmental units, government-sponsored plans, labor groups, and expatriates. The company was formerly known as CVS Caremark Corporation and changed its name to CVS Health Corporation in September 2014. The company was founded in 1963 and is headquartered in Woonsocket, Rhode Island.

Expertise: financial technology, analyzing market trends. Brian is a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian’s background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors. Brian can be reached at brian@finbox.io or at +1 (516) 778-6257.

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