$5 Billion Opioid Settlement Boosts CVS Stock. Here’s Why.


  • Shares of CVS Health (CVS) stock are up 3% today on news of a strong Q3 earnings print and legal settlement.
  • The pharmacy retailer has agreed to pay $5.2 billion to settle legal claims against it in the national opioid crisis.
  • The legal settlement lifts a cloud of uncertainty that was hanging over CVS stock even as the company reported a Q3 earnings beat.
CVS stock - $5 Billion Opioid Settlement Boosts CVS Stock. Here’s Why.

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Shares of pharmacy retailer CVS Health (NYSE:CVS) stock are trending and up 3% today after the Woonsocket, Rhode Island-based company reported better-than-expected third-quarter earnings and announced that it has reached a $5.2 billion settlement related to the opioid crisis.

While the Q3 print was a definite positive for the company and CVS stock, analysts are also applauding the opioid settlement, noting that the financial penalty will be paid out over several years and that it brings some much-needed closure and clarity to the company and its future finances. Prior to today, CVS stock had been down 9% on the year and trading at $94.62 a share.

What Happened

In terms of its Q3 results, CVS Health reported earnings per share of $2.09 versus $1.99 which was anticipated on Wall Street. Revenue for the July through September period came in at $81.16 billion compared to $76.75 billion which was expected by analysts who cover the company. CVS attributed the strong print to pharmacy services revenue which rose 10% from a year ago, and retail and long-term care revenue which increased about 7% year-over-year. This is the third consecutive quarter that CVS has beaten Wall Street’s earnings expectations.

At the same time that CVS released its earnings, the company announced that it has reached a $5.2 billion settlement pertaining to its role in the national opioid crisis. According to CVS, the settlement resolves all existing claims against it related to the distribution of opioid medications. Owing to the strong earnings and legal settlement, CVS raised its full-year guidance, saying it now expects earnings per share between $8.55 and $8.65, up from a previous range of $8.40 to $8.60.

Why It Matters

The latest news from CVS Health is positive across the board. The company’s strong Q3 earnings show that the business is continuing to fire on all cylinders even as demand for Covid-19 vaccines and booster shots declines. At the same time, the legal settlement related to the opioid crisis lifts a huge cloud of uncertainty that was hanging over the company.

Markets generally like certainty and clarity, which the $5.2 billion opioid settlement provides to CVS. That the company has been able to raise its forward guidance following the settlement and strong third-quarter financial results only adds to the bullish sentiment around CVS stock.

Despite its 9% decline this year, CVS stock has outperformed the benchmark S&P 500 index which has fallen 20% year-to-date and is in bear market territory.

What’s Next for CVS Stock

On the heels of a strong quarterly print and legal settlement related to opioids, sentiment towards CVS stock is growing stronger. Today’s rally could be the start of sustained gains in the share price given the bright outlook for the company. Investors may want to consider adding CVS stock to their portfolio while the shares are still discounted and before they get more expensive.

On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Article printed from InvestorPlace Media, https://investorplace.com/2022/11/5-billion-opioid-settlement-boosts-cvs-stock-heres-why/.

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