What to expect from CVS Health’s second quarter?

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CVS Health (NYSE: CVS) is scheduled to release its second quarter 2022 results on Wednesday, August 3. We expect CVS stocks to trade higher following the results announcement, with second quarter revenue and earnings likely to be above consensus estimates, primarily driven by the post-pandemic retail recovery. However, the company will see a lower contribution from the administration of the Covid-19 vaccine. Not only do we expect CVS to report a positive second quarter, we also believe CVS stocks have more room for growth, as discussed below. Our interactive dashboard analysis on CVS Health earnings example has additional details.

(1) Revenue is expected to exceed consensus estimates

  • Trefis estimates CVS revenue in the second quarter of 2022 to be approximately $76.7 billion, reflecting 6% year-on-year growth, and it is in line with the consensus estimate of $76.4 billion.
  • While the Covid-19 vaccine and testing of CFS has boosted sales growth in 2021, the contribution is expected to be much lower this year.
  • CFS should benefit from a continued rise in overall medical membership.
  • Looking back at the first quarter of 2022, CVS reported revenue up 11% yoy to $76.8 billion, driven primarily by higher revenues from retail and pharmacy services.
  • Our dashboard on CVS Health’s Revenue provides more details about the business segments.

(2) EPS likely above consensus estimates

  • CVS’ second quarter 2022 adjusted EPS is expected to be $2.19 per Trefis analysis, slightly ahead of the consensus estimate of $2.17.
  • CVS adjusted net income of $2.9 billion in Q1 2022 reflected a 9% year-on-year increase, primarily due to higher revenues.
  • On an adjusted basis, CVS operating margins were flat (yoy) at 4.1% in the first quarter.
  • For the full year 2022, we expect adjusted earnings per share to be $8.40, in line with 2021 levels.

(3) CVS stocks have more room for growth

  • we estimate CVS Health’s Rating to $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 current levels, CVS stock is trading at 11x projected future earnings, compared to the 12x figure at the end of 2021.
  • That said, if the company reports positive Q2 results and 2022 forecasts that beat street estimates, the P/E multiple will likely be revised upwards, resulting in higher levels for CVS stocks.

While it may seem like CVS stocks have more room for growth, it’s helpful to see how Colleagues of CVS Health rate on metrics that matter. Other valuable comparisons for companies in different sectors can be found at Pear Comparisons.

In addition, the Covid-19 crisis has led to many price discontinuities that can provide attractive trading opportunities. For example, you will be amazed at how counterintuitive stock valuation is Target vs Emerging Bio-Solutions.

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