👨‍⚕️ Is CVS Health Spreading Optimism All Around?

Intel plans investment; Costs hit Lennar.

Hey Global Investor! Here’s what you need to know before the US markets open.

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👨‍⚕️ CVS Health: Much-Needed Holiday Cheer?

Shares of US’ second-largest healthcare company by market cap, CVS Health Corporation (CVS), are at a 52-week high. The company projected accelerated sales compared to earlier forecasts. On top of this, news of share buybacks and dividends made for a happy bunch of investors! (Tweet This)


About 85% of US citizens live within 10 miles of a CVS store. ~4.5M customers visit the company’s ~10K stores every day. CVS’ stated intention is to fix a broken healthcare system that frustrates customers, keeps increasing costs, and delivers poor outcomes.

Consumer Value Stores was founded in 1963 by three partners as a chain of health and beauty aid stores but began to add pharmacies a few years later. The company merged with retail chain business Melville Corporation to facilitate growth and expansion but was spun off as CVS in 1996 and went public as a standalone company.

It acquired over 2.5K Revco drug stores a year later, establishing its presence in Midwestern, Southeastern, and Eastern states. In 2007, CVS merged with pharmacy benefits manager Caremark for $24B to create CVS Caremark.

The merged entity was charged with unfair trade practices and violation of privacy protections in 2009 and shelled out $2.25M to settle the charges. The same year, charged with making misleading claims on its AirShield tablets, the company paid another $2.8M as restitution to consumers who purchased the tablets.

In 2014, CVS announced that it would no longer sell tobacco products at its 7.7K stores across the US. It also changed its corporate name to “CVS Health.” In December 2017, CVS acquired insurance provider Aetna for a whopping $70B.

With both Aetna’s insurance business and Caremark under its wing, CVS pushed to lower costs and increase reach. In addition, it introduced urgent-care locations called MinuteClinics in many of its stores and converted some stores into HealthHubs. This new store format includes services ranging from therapy appointments to yoga classes and sleep apnea screenings.

Grand Plans

Here’s a snapshot of CVS’ forecasts for this fiscal year and the next one.

  • Revenue for fiscal 2021: ~$290B. Previous forecast: ~$288B
  • EPS for fiscal 2021: $8. Previous forecast: $7.95
  • Revenue for fiscal 2022: ~$307B
  • EPS for fiscal 2022: $8.20

During the pandemic, people relied on telehealth for Covid guidance, tests, and shots. CVS has administered over 50M Covid-19 vaccine doses and conducted over 29M tests as of November. These services brought 32M new customers to its stores. While Covid-19 tests and vaccines will bring in ~$3B in revenue this year, CVS expects this number to drop by ~35% next year.

As shoppers shift online, the company is ramping up its digital plans. As part of the strategy, it plans to close about 900 stores over the next three years, starting in the spring of 2022, and turn regular stores into healthcare destinations. Store closures will comprise 9% of its total footprint. In addition, the company will support impacted employees in finding their next opportunity.

CVS has primary care ambitions – enabling citizens to book a doctor’s appointment quickly and conveniently. Additionally, it plans to connect more people to therapists to help address mental health issues. The company has indicated it’s open to partnerships or M&A activity on this front.

The company also announced the resumption of share buyback of up to $10B (the last such program was in 2017). It also increased its annual dividend by 10% to $2.2 per share. This good news and CVS’ efforts to be the first destination for customers who need healthcare assistance brewed ample optimism in the investor community. Now the company needs to roll up its sleeves and deliver!

Market Reaction
CVS ended at $100.55, up 1.79%. The stock is up 44% this year.

Company Snapshot 📈

CVS $100.55 +1.77 (1.79%)

Analyst Ratings (29 Analysts) BUY 76%  HOLD 24%  SELL 0%

Newsworthy 📰

Investment: Intel to invest $7B in Malaysia to build a new plant, creating 9K jobs (INTC +1.95%)

Impact: Costlier Lumber, supply chain snags weigh on Lennar profit; shares slump (LEN -7.33%)

Better: Neogen CEO says deal with 3M’s food-safety unit improves blockchain innovation (NEOG +2.80%)

Later Today 🕒

  • Adobe Inc. Earnings (ADBE)
  • Accenture Plc Earnings (ACN)
  • Rivian Automotive Earnings (RIVN)
  • FedEx Corp. Earnings (FDX)
  • Jabil Inc. Earnings (JBL)
  • Steelcase Inc. Earnings (SCS)
  • Scholastic Corp. Earnings (SCHL)
  • 7:00 PM IST: Jobless Claims
  • 7:45 PM IST: Industrial Production Index

Today’s Market Terminology: Operating Loss

Net operating loss occurs when certain tax-deductible expenses exceed taxable revenues for the particular period

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