As you might know, CVS Health Corporation (NYSE:CVS) recently reported its annual numbers. Results were roughly in line with estimates, with revenues of US$256b and statutory earnings per share of US$5.08. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the most recent consensus for CVS Health from 21 analysts is for revenues of US$262.9b in 2020, which is a credible 2.8% increase on its sales over the past 12 months. Statutory earnings per share are expected to increase 9.6% to US$5.58. In the lead-up to this report, analysts had been modelling revenues of US$256.6b and earnings per share (EPS) of US$5.60 in 2020. So it looks like there's been no major change in sentiment following the latest results, although analysts have made a slight bump in to revenue forecasts.
It may not be a surprise to see that analysts have reconfirmed their price target of US$84.19, implying that the uplift in sales is not expected to greatly contribute to CVS Health's valuation in the near term. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic CVS Health analyst has a price target of US$109 per share, while the most pessimistic values it at US$71.00. This shows there is still quite a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
In addition, we can look to CVS Health's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. We would highlight that CVS Health's revenue growth is expected to slow, with forecast 2.8% increase next year well below the historical 10%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 6.7% next year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect CVS Health to grow slower than the wider market.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Fortunately, analysts also upgraded their revenue estimates, although our data indicates sales are expected to perform worse than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple CVS Health analysts - going out to 2024, and you can see them free on our platform here.
You can also see whether CVS Health is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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