CVS Gains 6% On Raised 2020 Profit Outlook; Analyst Says Hold

Shares of CVS Health Corp. rose 5.8% on Friday after the retail pharmacy chain operator and healthcare services provider reported stronger-than-expected 3Q results and raised its profit and cash flow guidance for the full-year 2020.

CVS Health’s (CVS) 3Q adjusted EPS of $1.66 decreased 9.8% from the year-ago quarter but came ahead of consensus estimates of $1.33. Revenues of $67.06 billion grew 3.5% year-over-year and topped Street estimates of $66.7 billion.

CVS CEO Larry J. Merlo said, “Our strong third quarter results demonstrate continued execution of our long-term strategic plan that is transforming the way health care is delivered. As an integrated health services provider, we’re developing holistic and innovative solutions that meet the needs of our customers in the community, in the home or in the palm of their hand.” (See CVS stock analysis on TipRanks).

Buoyed by stronger-than-expected 3Q results, the company raised its adjusted EPS and operating cash flow outlook for the full year. CVS Health now predicts 2020 adjusted EPS between $7.35 and $7.45, up from the earlier guidance range of $7.14-$7.27. CVS lifted its operating cash flow projection range to $12.75-$13.25 billion from $11-$11.5 billion expected previously.

Following its earnings release, Oppenheimer analyst Michael Wiederhorn reiterated his Hold rating on the stock. In a note to investors, Wiederhorn wrote, “We believe CVS’s long-term outlook could benefit from the integrated model that Aetna brings. However, we expect that to take time, while legacy operations and headline risks are likely to remain. Although the valuation appears attractive by historical levels, we expect some of these other moving parts to dominate the story for the foreseeable future.”

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 5 Buys and 2 Holds. With shares down 12.6% year-to-date, the average price target of $78.40 implies upside potential of about 20.7% to current levels.