Author: Edeh Kelechi
Wall Street analysts predict that CVS Health stock will fall after the company releases its third-quarter (Q3) results. Experts also predict that the healthcare company’s revenue and earnings will fall short of expectations.
Rising costs and reduced contributions from the COVID-19 vaccine administration are significant reasons for these projections. Although experts appear to be on the right track regarding CVS Health Stock Q3 result predictions, we believe the company’s stock is undervalued.
This article will explain how the company’s stock performed compared to analyst predictions and what this means for the company’s stock.
CVS Health Beats Wall Street Expectations.
CVS Health, the healthcare and pharmacy giant, reported its third-quarter earnings on Wednesday, and it appears that the company outperformed Wall Street’s expectations.
Let’s take a look at how the company fared in comparison to Wall Street analysts’ predictions:
Revenue
Experts predicted that the company’s revenue would fall short of the consensus estimate. According to Trefis, CVS Health’s third-quarter revenue is expected to be around $76.75 billion, representing a 4% increase year over year.
Furthermore, CVS’s COVID-19 vaccine, which drove the company’s revenue growth in 2021, is expected to contribute significantly less, this year.Â
However, according to CVS Health’s Q3 report, the company managed to pull in $81.16 billion in revenue, representing a 10% increase over the year.Â
A breakdown of the revenue reports reveals that CVS Health Care Benefits increased by nearly 10% over the same quarter last year. In addition, revenue from the company’s pharmacy services increased by 10% compared to the Q3 reports for 2021.
Experts were correct, however, on the COVID-19 vaccination front, as the company reported a decrease in profit due to a drop in demand for COVID tests and vaccines.
Earnings Per Share (EPS)
According to the consensus estimate, CVS Health’s EPS would be $1.99, while Trefis predicted it would be around $1.95. While these estimates are consistent with the figure reported by the health company for the same quarter last year, the company reported an EPS of $2.09 for its 2022 Q3 reports.
CVS Health also raised its full-year outlook for the second quarter in a row, with the company now expecting adjusted EPS for the year to be between $8.55 and $8.65. This expected EPS is higher than the company’s initial prediction in August, which was between $8.40 and $8.60 due to solid sales of COVID-related anti-viral drugs.
What Do These Reports Indicate for CVS Health Stocks?
Because the company’s third-quarter results exceeded experts’ expectations, its price-to-earnings (P/E) ratio will be revised upward, leading to higher levels for the company’s stock. It’s also worth noting that after the company released its Q3 results, its shares increased by about 4%.
What does this mean for CVS Health investors?
There are no simple answers to this, but investors can look at the company’s earnings outlook, which includes the current consensus earnings expectation for the upcoming quarter(s) and any recent changes to this expectation.
In addition, studies have shown a strong link between trends in earnings estimate revisions and short-term stock movements. You can track these revisions by yourself or use a rating tool.
Final Thoughts
To answer the question, “Will CVS Health stock rise after Q3 results?” the answer is yes. Why? Mainly because the company’s third-quarter results exceeded analysts’ expectations, which means the company’s price-to-earnings ratio will be revised, implying higher stock for the company. Investors should keep an eye on market trends and keep in mind that the company’s outlook can significantly impact the stock’s performance.
