Analysts At Argus Review CVS Q2 Earnings

Argus said the second-quarter results of CVS Health Corp (NYSE: CVS) pacified investor concerns over the company losing PBM business to a rival, as it "appears that was just normal earnings season turnover."

CVS reported non-GAAP earnings of $1.32 per share in the second quarter, above the average analyst estimate of $1.30 and the company's guidance range of $1.28–$1.31.

Among others, the highlights of CVS's results include retention rate of about 97.5 percent with 75 percent of renewals completed and net new business totaling $4.6 billion.

"We believe that the company's integrated model, which includes the CVS retail pharmacies, the Caremark PBM, a growing Specialty pharmacy business, pharmacies within Target Stores and MinuteClinic, is the right structure to deliver cost savings, better care, and attractive shareholder returns through earnings growth, dividend increases and share repurchases," analyst Christopher Graja wrote in a note.

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Graja, who maintained his Buy rating and $120 target price on the stock, pointed out the company's "ability to identify gaps in patient care, encourage patients to get the treatment and medicines they need to stay healthy, and identify opportunities for patients and plan sponsors to save money with generic medicines."

In addition, CVS raised and narrowed its full-year 2016 adjusted (non-GAAP) earnings guidance with the new midpoint rising $0.045. The new adjusted guidance is $5.81–$5.89.

But, CVS cut its full-year GAAP guidance for EPS from continuing operation to $4.92–$5.00 from $5.24–$5.39, primarily based on the acquisition costs in the second quarter. Argus cut its GAAP FY16 EPS estimate to $5.00 from $5.40.

"We believe that CVS shares are trading at levels that will allow them to surpass the performance of the S&P 500 on a risk-adjusted basis over the next year. The shares are down about 12 percent in the last 12 months," Graja noted.

At time of writing, shares of CVS were down 0.81 percent to $97.27.

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