CVS Health (NYSE: CVS) is scheduled to report its Q2 2022 results on Wednesday, August 3. We expect CVS stock to trade higher post the results announcement, with Q2 revenue and earnings likely being above the consensus estimates, primarily driven by the post-pandemic recovery in the retail business. However, the company will see a lower contribution from the Covid-19 vaccine administration. Not only do we expect CVS to report an upbeat Q2, we find that CVS stock has more room for growth, as discussed below. Our interactive dashboard analysis on CVS Health’s Earnings Preview has additional details.
(1) Revenue expected to be above the consensus estimates
- Trefis estimates CVS’ Q2 2022 revenues to be around $76.7 billion, reflecting a 6% y-o-y growth, and it compares with the $76.4 billion consensus estimate.
- While CVS’ Covid-19 vaccine and testing drove its revenue growth in 2021, its contribution is expected to be much lower this year.
- CVS should benefit from a continued rise in total medical membership.
- Looking back at Q1 2022, CVS reported an 11% y-o-y rise in sales to $76.8 billion, led by higher retail and pharmacy services revenue.
- Our dashboard on CVS Health’s Revenues offers more details on the company’s segments.
(2) EPS likely to be above the consensus estimates
- CVS’ Q2 2022 adjusted earnings per share (EPS) is expected to be $2.19 per Trefis analysis, slightly ahead of the $2.17 consensus estimate.
- CVS’ adjusted net income of $2.9 billion in Q1 2022 reflected a 9% y-o-y rise, primarily due to higher revenues.
- On an adjusted basis, CVS operating margins remained flat (y-o-y) at 4.1% in Q1.
- For the full-year 2022, we expect the adjusted EPS to be $8.40 aligning with the level seen in 2021.
(3) CVS stock has more room for growth
- We estimate CVS Health’s Valuation to be $116, which is 21% above the current market price of $96.
- This represents a P/E multiple of 14x based on our EPS forecast of $8.40 in 2022.
- At its current levels, CVS stock is trading at 11x its expected forward earnings, compared to the 12x figure in late 2021.
- That said, if the company reports upbeat Q2 results and 2022 guidance better than the street estimates, the P/E multiple will likely be revised upward, resulting in higher levels for CVS stock.
While CVS stock looks like it has more room for growth, it is helpful to see how CVS Health’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Target vs. Emergent Biosolutions.
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