CVS reports strong quarterly results for 2QFY15, leading to a positive outlook on the stock from Jefferies
CVS Health Corp. announced its second quarter results for fiscal year 2015 earlier last week. However, the stock declined during the trading session, after the earnings release, it started to recover the next day. The earnings announcement resulted in many sell side firm to revise their viewpoint on the company’s stock. Here is what Jefferies think about the stock.
CVS Health Corp. was able to report adjusted earnings of $1.22 per share for the recent quarter, surpassing analysts’ estimates by almost 2.6 cents. The company beat analysts’ expectation for the fifth time in a row. The figure enhanced by $0.09 year over year, as adjusted earnings for the prior year quarter was $1.13 per share.
The revenue for the company came in at $37.17 billion, despite of strong growth, it fell short of consensus estimate by 0.01%, and this was the first revenue for the company in past 13 quarters. The revenue figure for the period reflected a year over year growth of over 7%.
Jefferies has given the stock a Buy rating, with a price target of $125. The firm’s analyst having coverage on CVS stock believes more than expected retail, strong growth in Rx, and a robust beginning to pharmacy benefit manager for the current year is the main reason for the bullish stance on the company’s stock. For pharmacy benefit manager, CVS has announced gross latest business wins of around $12 billion up till now, together with $11 billion in net wins. Adding to this, the specialty Rx growth of 28% has surpassed growth in the division.
Investors’ negative reaction after the earnings announcement was primarily because of the reduction in guidance by the company’s management for third quarter. However, according to analysts it should not bother investors, as CVS has much of its emphasis on acquisition this year. CVS Health has also cut $1 billion from the amount due for share buyback to support funding of its Omnicare and Target Pharmacy acquisition.
The $125 price target given by the sell side firm uses a 20.5x of multiple for price to earnings ratio, using the expected figures for FY16, according to CVS stock analysis.
The Street is still bullish on company’ stock. Almost 28 analysts at Bloomberg covered the stock, 25 gave it a Buy, 3 rate it a Hold, while none suggests it a Sell rating, as reported by CVS stock news. The consensus price target is $119.35, which shows a 7.5% of return potential compared to current closing price.
RBC Capital Markets analyst Fran G. Morgan is most bullish with an Outperform rating and target price of $132 on the stock, while Morgan Stanley analyst Ricky Goldwasser is the most bearish with $111 target price and Overweight rating.
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