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Earnings Preview: Key Performance Drivers for CVS Health in 2Q15

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CVS Health’s 2Q15 earnings report preview

CVS Health (CVS) will declare its 2Q15 earnings on August 4, 2015. The quarter ended June 30, 2015, for fiscal year ending December 31, 2015. Markets are expecting a solid quarter with consensus Wall Street analyst estimates projecting earnings per share (or EPS) of $1.196, up 5.8% over the comparable quarter last year. The company has moved ahead of Wall Street estimates in the last three quarters.

CVS Health’s guidance at the end of 1Q15 projected adjusted EPS within the range of $1.17–$1.20. However, the revision in its share repurchase program from $6 billion to $5 billion for full year 2015 is expected to lower EPS by $0.01 in 2015.

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Peer group performance

Peer Walgreens Boots Alliance (WBA), which declared 3Q15 earnings on July 9, posted a 22.9% rise in adjusted EPS. WBA stock price rose 4.2% to $89.55 on July 9. Rite Aid (RAD) will declare 2Q16 earnings in September.

Quarterly updates

The last quarter has been an eventful one for CVS. The company made a couple of high-profile acquisition announcements, including long-term care pharmacy services provider Omnicare (OCR) and Target’s (TGT) ~1,660 pharmacies. While these purchases still need regulatory approval, they’re likely to influence some of the company’s capitalization decisions in the short to medium term. You’ll read more on the impact of these in Part 8 of this series.

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In this series, we’ll also provide an update on CVS’s performance in 2015. You’ll also read about the company’s guidance for the quarter and the key drivers expected to influence 2Q15 results. In Part 11, we’ll provide an update on the key stock price and returns trends affecting CVS and its peer group.

Pharmacy major

CVS Health is the largest drugstore chain in the United States in terms of sales and market cap. The company clocked revenue and EBITDA (earnings before interest, taxes, depreciation, and amortization) of $143 billion and $10.9 billion, respectively, in the last 12 months.

CVS and Walgreens Boots Alliance together constitute 11.7% of the portfolio holdings in the Consumer Staples Select Sector SPDR Fund (XLP). CVS, Walgreens Boots Alliance, and Rite Aid together constitute ~3% of the portfolio holdings of the SPDR S&P Retail ETF (XRT).

You can read about CVS’s proposed purchase from Target and its implications in our series Why Target’s Pharmacies Sale to CVS is an Industry Game-Changer.

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