CVS (CVS) reported better-than-expect third quarter earnings this week. Is that enough to earn a “buy” recommendation from me?
CVS – Company Profile
CVS provides integrated pharmacy health care services in the U.S. CVS is best known for operating over 7,700 CVS pharmacies and Longs Drug stores throughout the U.S. CVS pharmacies are stocked up with prescription and over-the-counter drugs, beauty products, seasonal merchandise, greeting cards and a limited selection of convenience foods.
While most of us have known CVS as CVS Caremark, it recently changed its name to CVS Health Corp. as part of a larger rebranding initiative. True to its new name, CVS Health also stopped selling cigarettes in September. CVS Health recently opened 45 new retail drugstores and acquired an additional 33 retail drugstores.
CVS – Earnings Rundown
For the third quarter, CVS Health reported net income of $948 million, or 81 cents per share, down from $1.26 billion or $1.02 per share last year. Adjusted earnings were $1.15 per share, which beat the $1.13 consensus earnings-per-share estimate by 1.8%.
Meanwhile, net revenue jumped by 10% year-on-year to $35.02 billion, topping analysts’ expectations of $34.75 billion in revenues. Breaking it down, retail pharmacy revenues increased by 3.1% to $16.75 billion, while pharmacy services rose 15.7% to $22.5.
In the fourth quarter, CVS expects adjusted earnings from continuing operations to be $1.18 to $1.21 per share, which is in line with the Street view of $1.21 per share. All-in-all, CVS released a solid report.
CVS Stock’s Current Ratings
For the past year, CVS has been rated as a solid “buy.” The main reason is that institutional buying pressure is strong for CVS.
CVS stock earns an “A” for its Quantitative Grade. On the fundamentals side, CVS is doing well, earning “Bs” on operating margin growth, earnings growth, analyst earnings revisions, cash flow and return on equity.
At the same time, CVS could improve its sales growth, earnings momentum and earnings surprises, which all receive “C” grades. Overall, CVS earns a “C” for its Fundamental Grade, but I suspect that this grade could improve once the latest earnings results have been plugged in.
As of this posting, Nov. 7, I consider CVS an “A-rated strong buy.”
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.