What To Expect From CVS Health Stock Post Q2 Results?

CVS Health (NYSE: CVS) is scheduled to report its Q2 2021 results on Wednesday, Aug 4. We expect CVS Health to likely post revenue and earnings slightly above the street expectations, primarily driven by Covid-19 vaccine administration. The company will also benefit from a recovery in its pharmacy management business. While we expect the company to navigate well in Q2 based on these factors, a rebound in total procedure volume will likely result in higher benefit costs, weighing on the overall earnings growth, in our view. Furthermore, our forecast indicates that CVS’ valuation is $92 per share, which is 12% above the current market price of around $82, implying CVS stock has more room for growth. Our interactive dashboard analysis on CVS Health’s Pre-Earnings has additional details.

(1) Revenues expected to be slightly above the consensus estimates

Trefis estimates CVS Health’s Q2 2021 net revenues to be around $70.3 billion, slightly above the $70.1 billion consensus estimate. Revenue growth is expected to be led by the Covid-19 vaccination, which CVS is administering in over 8,000 locations. However, given the rise in overall vaccination rate, the demand for testing has come down. As such, CVS’ revenues from administering the Covid-19 testing is expected to see a sequential decline. On the Aetna side, the company will likely continue to add new Medicaid members. Also, given an increase in hospital visits, the company’s pharmacy business likely rebounded in Q2.  Our dashboard on CVS Health’s Revenues offers more details on the company’s segments.

2) EPS also likely to be just above the consensus estimates

CVS Health’s Q2 2021 adjusted earnings per share (EPS) is expected to be $2.09 per Trefis analysis, compared to consensus estimate of $2.06. CVS Health’s adjusted net income of $2.7 billion in Q1 2021 reflected an 8% rise from its $2.5 billion figure in the prior-year quarter. This can be attributed to higher revenues and an expansion of margins. For the full-year 2021, we expect the adjusted EPS to be $7.65, compared to $7.50 seen in 2020.

(3) Stock price estimate 12% higher than the current market price

Going by our CVS Health’s Valuation with an EPS estimate of $7.65 and a P/E multiple of 12x in 2021, this translates into a price of $92, which is 12% above the current market price of around $82. While the 12x figure compares with levels of 9x – 10x seen over the recent years, we believe the P/E multiple will likely increase with margin expansion and better earnings growth over the coming years.

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year.