CVS Health Corporation CVS is scheduled to report second-quarter 2023 results on Aug 2, before the opening bell.
In the last reported quarter, the company’s adjusted earnings of $2.20 exceeded the Zacks Consensus Estimate by 6.28%. The company beat estimates in the trailing four quarters, the average surprise being 6.52%.
Let’s look at how things have shaped up for CVS Health prior to this announcement.
Factors at Play
CVS Health’s newly-formed Pharmacy & Consumer Wellness segment (includes all the company’s omnichannel pharmacy capabilities, legacy retail pharmacy, specialty and mail order pharmacy fulfillment and infusion services along with CVS Health’s front store offerings) is likely to have benefited from increased prescription and front store volume, similar to the first quarter of 2023. The company’s efforts to optimize the retail portfolio, which now consists of three models, including advanced primary care clinics, enhanced health hub locations and traditional CVS pharmacy locations, are likely to have aided second-quarter results.
CVS Health Corporation Price and EPS Surprise
CVS Health Corporation price-eps-surprise | CVS Health Corporation Quote
CVS Health has been making noteworthy progress in expanding access to care through digital and virtual channels. During the first quarter of 2023, CVS Health’s unique digital customers increased to more than 50 million. The company also interacted with nearly five million customers daily across the community footprint. The company also signed two additional renewable energy purchases that meaningfully advance its transition to 50% renewable energy by 2040. We expect these developments to have benefited the company’s second-quarter 2023 revenues significantly.
The company also launched a variety of new MinuteClinic virtual care services to support women's health that will be available 24/7. CVS Health’s continued efforts to expand digital health services and deepen engagement through personalization are expected to have broadened its customer base in the second quarter, thus adding to its top line.
However, challenging market conditions and normalizing COVID trends might have dented growth within the segment in the soon-to-be-reported quarter.
Per our model, this segment is expected to report 9.1% year-over-year revenue growth this time around.
The Health Services segment (includes most of the operations of the company’s legacy Pharmacy Services segment as well as its healthcare delivery operations) is expected to have recorded robust sales growth, banking on increased pharmacy sales and prescriptions filled, driven by demand for consumer health and cough, cold, and flu products. Also, growth in specialty pharmacy and brand inflation is also likely to have contributed to the pharmacy services arm. We are also positive about the company’s newly developed comprehensive set of programs to manage specialty trends, which include a formulary exclusion strategy.
Moreover, we also expect brand price inflation, new product launch, higher utilization and new PBM clients to have fueled growth in the second quarter. This is likely to have simplified and accelerated the process of filling prescriptions, thus benefiting business performance. However, continued client price improvements might have dented growth in the second quarter for this business.
Our model projects this segment to report 4.1% year-over-year revenue growth.
The Healthcare Benefits arm is likely to have been driven by sustained membership growth across all product lines. During the first quarter of 2023, medical membership increased by 1 million, reflecting improvement across the company’s individual exchange business. We expect this growth momentum to have continued. Further, CVS Health’s competitive cost structure, integrated benefit designs and innovative product portfolio are likely to have aided the growth of the healthcare benefits business.
Our model projects this segment to report 13.4% year-over-year revenue growth in the second quarter.
Key Q2 Estimates
The Zacks Consensus Estimate for second-quarter 2023 adjusted earnings of $2.12 per share implies an 11.7% fall from the year-ago reported figure.
The consensus estimate for revenues is pegged at $86.74 billion, suggesting a 7.6% rise from the prior-year reported number.
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 a higher chance of beating estimates. However, this is not the case here, as you can see:
Earnings ESP: The company has an Earnings ESP of -0.92%. You can uncover the best stocks 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 some medical stocks that have the right combination of elements to post an earnings beat this quarter, per our model.
Mckesson MCK has an Earnings ESP of +1.93% and a Zacks Rank #2. The company will release first-quarter fiscal 2024 results on Aug 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
MCK’s earnings surpassed estimates in three of the trailing four quarters and missed the same once, with the average surprise being 4.48%. The Zacks Consensus Estimate for Mckesson’s fiscal 2024 first-quarter EPS suggests an increase of 0.5% from the year-ago reported figure.
Zimmer Biomet ZBH has an Earnings ESP of +2.34% and a Zacks Rank #2. The company is scheduled to release second-quarter 2023 results on Aug 1.
ZBH’s earnings surpassed estimates in all the trailing four quarters, with the average surprise being 7.38%. The Zacks Consensus Estimate for Zimmer Biomet’s second-quarter EPS indicates in-line year-over-year numbers.
AmerisourceBergen ABC currently has an Earnings ESP of +0.59% and a Zacks Rank #2. ABC is scheduled to release third-quarter fiscal 2023 results on Aug 2.
The company’s earnings surpassed estimates in all the trailing four quarters, with the average surprise being 3.14%. The Zacks Consensus Estimate for ABC’s fiscal 2023 third-quarter EPS indicates 5.6% increase from the year-ago reported figure.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
