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CVS Health (CVS) to Report Q2 Earnings: What's in the Cards?

Zacks Equity Research
·6-min read

CVS Health Corporation CVS is scheduled to report second-quarter 2022 results on Aug 3, before the opening bell.

In the last reported quarter, the company’s adjusted earnings of $2.22 exceeded the Zacks Consensus Estimate by 3.7%. The company beat estimates in the trailing four quarters, the average surprise being 8.2%.

Let’s take a look at how things have shaped up prior to this announcement.

Factors at Play

The retail/long-term care (LTC) segment is likely to have benefited from the enhanced pharmacy and front-store sales growth, similar to the last-reported first quarter. We expect this sales performance to have been led by continued demand for COVID-19 over-the-counter (OTC) test kits and vaccines. With economies reopening and COVID-19 cases on the rise, the segment is likely to have witnessed continued sales of COVID-19 OTC test kits in the to-be-reported quarter. The retail segment has also been gaining from strength in paid membership programs. Per the first-quarter earnings call, the company’s CarePass membership was up 33% year over year to 6 million members. We expect this trend to have continued in the second quarter, benefitting the retail business. The company’s efforts to optimize the retail portfolio to consist of three models, including advanced primary care clinics, enhanced health hub locations and traditional CVS pharmacy locations, is likely to have been advantageous for upcoming Q2 results.

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Our model suggests retail/LTC revenues of $24.63 billion for the second quarter.

CVS Health has been making noteworthy progress in terms of expanding access to care through digital and virtual channels. Per the May 2022 update, the company’s community health destinations saw roughly 1.5 million in person and virtual visits in the first quarter, up nearly 35% year over year. The company’s digital capabilities for health interactions, including COVID-19 testing and vaccines, prescription services and sales of health and wellness products sales are anticipated to have enhanced consumer engagement across all CVS Health businesses.

CVS Health Corporation Price and EPS Surprise

 

CVS Health Corporation Price and EPS Surprise
CVS Health Corporation Price and EPS Surprise

CVS Health Corporation price-eps-surprise | CVS Health Corporation Quote

 

In May 2022, CVS Health launched a new virtual care solution, the CVS Health Virtual Primary Care, which is available through a single digital platform. The new solution allows consumers to opt for care when and where they require it. It is currently being sold to Aetna fully-insured, self-insured plan sponsors and CVS Caremark clients. The company has also been making continued efforts to simplify digital health adoption among customers. The company, in the last quarter’s earnings update, stated that the MinuteClinic scheduling had been integrated into Google Search to drive new and more convenient appointment bookings. These developments should have positively contributed to CVS Health’s second-quarter performance.

The pharmacy services segment is expected to deliver robust sales growth, banking on increased pharmacy sales and prescriptions filled, especially with the growing uptake of COVID-19 tests, vaccines, cough and cold and beauty and personal care products. Added to this, growth in specialty pharmacy and brand inflation is also likely to be contributing factor in the pharmacy services arm, similar to the last reported quarter. The company pairs specialty pharmacy programs with digital capabilities to provide customers with a convenient and connected experience while driving value in the marketplace. CVS Health is also leveraging the power of analytics and robotics to automate prescriptions. This would simplify and accelerate the process of filling prescriptions, benefitting the business performance.

Our model projects pharmacy services revenues of $41.14 billion for the second quarter.

The healthcare benefits arm is likely to have been driven by sustained membership growth across all product lines. The Medicare franchise, particularly, has been delivering strong results for the company in the past years. We expect this growth momentum to continue, driving growth in the to-be-reported quarter. We also anticipate increased government memberships to have contributed to the segment’s top line. Further, CVS Health’s competitive cost structure, integrated benefit designs and innovative product portfolio position the healthcare benefits business for further growth.

Per our model, the healthcare benefits segment is likely to deliver $22.44 billion in sales.

Key Q2 Estimates

The Zacks Consensus Estimate for second-quarter adjusted earnings of $2.16 per share implies a 10.7% fall from the year-ago reported figure. This compares to our own estimate of $2.14 for Q2.

The Zacks Consensus Estimate for revenues is pegged at $76.57 billion, suggesting a 5.5% growth from the prior-year reported number. This compares to our own estimate of $76.68 billion.

What Our Model Suggests

Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has higher chances of beating estimates. However, this is not the case here, as you can see:

Earnings ESP: The company has an Earnings ESP of -0.14%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #3.

Stocks Worth a Look

Here are a few stocks worth considering, as these have the right combination of elements to beat on earnings this reporting cycle.

Alcon Inc. ALC has an Earnings ESP of +1.08% and a Zacks Rank of #2. Alcon is expected to release second-quarter 2022 results on Aug 16. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alcon’s long-term earnings growth rate is estimated at 14.3%. ALC’s earnings yield of 3.09% compares with the industry’s (9.01%).

Adaptive Biotechnologies Corporation ADPT currently has an Earnings ESP of +3.47% and a Zacks Rank of #2. Adaptive Biotechnologies is scheduled to release second-quarter 2022 results on Aug 3.

ADPT’s long-term earnings growth rate is estimated at 10.3%.

ANI Pharmaceuticals, Inc. ANIP currently has an Earnings ESP of +13.04% and a Zacks Rank of #2. ANI Pharmaceuticals will release second-quarter fiscal 2022 results on Aug 8.

ANIP’s earnings yield of 4.06% compares with the industry’s (30.52%).

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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