Encome Wrap

CVS Health Shares Rally On Revised Q4 Outlook; Hit New Highs

The shares of CVS Health   advanced to a 52-week high on the NYSE in Tuesday’s intra-day trade on the announcement that the company has revised the 2021 earnings forecast and reaffirmation of prior guidance for 2022. It came on the heels of improved performance by the company in the Q4 quarter as more and more customers are flocking in for COVID-19 vaccinations and over-the-counter testing as the covid cases in the United States are spreading like wildfire. 

CVS Health revised guidance for the full year 2021 sees the earnings to come in a range of $5.87 to $5.92 per share, up from the previous outlook for $5.50 to $5.61 per share, according to the filing with the Securities and Exchange Commission. 

The healthcare company expects adjusted earnings per share in the range of $8.33 to $8.38 for the full fiscal year, higher than the previously projected earnings of $8.00 a share.

The updated range exceeds the expectations of $8.03 per share as estimated by the analysts surveyed by Refinitiv.

At the virtual J.P. Morgan Healthcare Conference on Tuesday morning, Chief Financial Officer Shawn Guertin said retail sales have come strong in the fourth quarter.

Guertin said vaccination rates were above what the company expected in November and December, and sales of over-the-counter Covid test kits, he said, also took off in December.

The retail side of the business has contributed about 80% to the company’s outperformance— with more than half of that coming from Covid vaccines.

“We were seeing positive signs across all of our businesses, all of our businesses did very well,” Guertin said. “Retail, in particular, has outperformed in the fourth quarter.”

Other factors such as larger net capital gains and the past year reserves played a part in the remaining 20%, according to him.

With the boom seen in the over-the-counter testing sales, the Centers for Medicare & Medicaid Services issued guidance yesterday mandating health insurers to cover such tests beginning Jan. 15. The new regulation is likely to impact the business of CVS health with unknown outcomes as it houses a managed healthcare company–Aetna and CVS Pharmacy, a retail pharmacy store in its portfolio.

On the impact side, Guertin believes there can be a variety of possibilities, such as an increase in the sales of drugstore items as consumers search aisles for test kits, elevated expenses as insurance members apply for test reimbursements, or a decrease in Covid tests billed to insurance by medical professionals as more people perform their own testing.

He said the company would elaborate more on the outlook during its fourth-quarter earnings call in early February.

CVS reiterated its 2022 forecast, which says earnings per share will come between $7.04 and $7.24, and between $8.10 and $8.30 per share, after adjustments.

Analysts are expecting CVS to quote an earning of $8.27 per share, after adjustments, in 2022.

CVS Health Corporation Stock

CVS Shares Rally On Revised Q4 Outlook; Hit New Highs

Shares of CVS Health advanced more than 1% in the pre-market trading session. The shares opened the market at $106.07, rallying to touch a fresh 52-week-high. So far in the trading session, the stock has touched the high of $107.26, breaking its previous 12-months high of $106.50

On the dashboard of Encome, the impact of the announcement on the social engagement for the stock amongst the users of Twitter and Reddit will be printed as the day proceeds.

On Monday, CVS Health stock activity surged 305.12%. The 6.10 million shares of stock exchanges hands, 300 thousand above the average of 5.80 million.

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