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CVS Health Corp CVS

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Stock XNYS Rating as of
$55.15 −1.16 (2.06%)
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Company Report

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CVS Earnings: Weak Medicare Advantage Profits Cut Into 2024 Outlook and Fair Value Estimate

Julie Utterback

Narrow-moat CVS Health delivered weak first-quarter results due to deflated profits in Medicare Advantage, or MA, where spiking medical utilization and mispriced plans caused insurance segment profits to decline while the pharmacy benefit management business dealt with the Centene contract loss. Management cut its 2024 guidance primarily on the weak MA trends, and we are reducing our intermediate-term expectations for CVS, as well, which pushed down our fair value estimate to $93 per share from $103. Shares remain undervalued.

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Price vs Fair Value

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CVS is trading at a 39% discount.
Price
$56.31
Fair Value
$15.00
Uncertainty
Medium
1-Star Price
$995.56
5-Star Price
$21.40
Economic Moat
Flxgnb
Capital Allocation
Ylcrkrcq

Bulls Say, Bears Say

Bulls

CVS' diverse operations create the opportunity to view a patient more holistically by managing both medical and pharmacy benefits, which could lead to revenue and cost synergies for the organization.

Bears

Healthcare reform will likely remain a recurring political topic until universal, affordable coverage is achieved in the U.S., and CVS' stock may experience volatility if scenarios that threaten its prospects gain traction.

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Trading Information

Previous Close Price
$56.31
Day Range
$53.70–56.74
52-Week Range
$53.70–83.25
Bid/Ask
$55.20 / $55.25
Market Cap
$69.23 Bil
Volume/Avg
37.9 Mil / 10.7 Mil

Key Statistics

Price/Earnings (Normalized)
7.17
Price/Sales
0.20
Dividend Yield (Trailing)
4.51%
Dividend Yield (Forward)
4.72%
Total Yield
8.78%

Company Profile

CVS Health offers a diverse set of healthcare services. Its roots are in its retail pharmacy operations, where it operates over 9,000 stores primarily in the U.S. CVS is also the largest pharmacy benefit manager (acquired through Caremark), processing over 2 billion adjusted claims annually. It also operates a top-tier health insurer (acquired through Aetna) where it serves about 26 million medical members. The company's recent acquisition of Oak Street adds primary care services to the mix, which could have significant synergies with all its existing business lines.
Sector
Healthcare
Industry
Healthcare Plans
Stock Style Box
Large Value
Total Number of Employees
300,000
Website
https://www.cvshealth.com

Competitors

Valuation

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Metric
CVS
HUM
ELV
Price/Earnings (Normalized)
 7.1713.1815.31
Price/Book Value
 0.952.353.01
Price/Sales
 0.200.350.72
Price/Cash Flow
 5.9311.2713.54
Price/Earnings
CVS
HUM
ELV

Financial Strength

Metric
CVS
HUM
ELV
Quick Ratio
 0.54——
Current Ratio
 0.81——
Interest Coverage
 4.557.868.49
Quick Ratio
CVS
HUM
ELV

Profitability

Metric
CVS
HUM
ELV
Return on Assets (Normalized)
 4.07%5.46%7.36%
Return on Equity (Normalized)
 13.68%17.15%20.87%
Return on Invested Capital (Normalized)
 7.90%11.21%13.85%
Return on Assets
CVS
HUM
ELV
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Healthcare Plans Industry Comparables

Screen in Investor
Ticker
Name
Morningstar Rating for Stocks
Capital Allocation
Economic Moat
Market Cap
UNH
UnitedHealth Group IncLlrkyvtxQqqpcl$445.4 Bil
ELV
Elevance Health IncHvgtpdqylXyyhs$122.0 Bil
CI
The Cigna GroupVdbsmccdKcpsnw$101.3 Bil
CNC
Centene CorpMsdkzwdmTvysmg$38.6 Bil
HUM
Humana IncGmlpzqfvTvvhtqb$37.9 Bil
MOH
Molina Healthcare Inc—Jtpndhs$19.9 Bil
OSCR
Oscar Health Inc Class A—Dcrj$4.1 Bil
ALHC
Alignment Healthcare Inc—Bfzc$995.2 Mil
CLOV
Clover Health Investments Corp Ordinary Shares - Class A—Qtqfr$318.7 Mil

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