As CVS Turns a Corner, Its Price Target Heats Up
Let's check this long-struggling stock amid some good news and healthy executive choices ...
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All of the sudden, CVS Health CVS is starting to appear healthier than it has for a bit.
The news Monday afternoon from the U.S. Centers for Medicare & Medicaid Services helped. The center reported that for the next calendar year payments to private Medicare Advantage companies would increase by 5.06% or more than $25 billion over 2025.
Making this generosity even more surprising was that just this past January, the same CMS issued its Advance Notice proposing that the increase come to 4.33% or more than $21 billion, and recently, Medicare coverage for the new-ish GLP obesity drugs, which are quite costly, was declined.
Health insurers across the U.S. marketplace rallied and rallied hard on the news. UnitedHealth UNH, the nation's largest Medicare Advantage insurer, was up almost 9% overnight as Humana HUM and Elevance ELV also ran higher. In fact, most health insurance companies popped on the move, including CVS Health (parent of Aetna), which gained almost 7%. ahead of the opening bell on Tuesday.
More News
On Tuesday morning, CVS Health announced that CFO Tom Cowhey will transition to become an adviser to CEO David Joyner effective May 12. It's no secret that CVS has struggled to turn around its fortunes since the departure of former CFO Shawn Guertin resigned in 2023.
Brian Newman has been named an executive vice president and CFO designate, effective April 12. Newman had most recently served as CFO and an executive vice president at United Parcel Service UPS. He was there for almost five years after spending 26 years with PepsiCo PEP where he worked in global operations.
Most importantly, the company announced that based on year-to-date results, CVS Health expects to meet or exceed previously issued guidance for the current full year, while acknowledging that Q1 results had not yet been finalized. In mid-February, it guided full year 2025 toward a unadjusted earnings per share of $4.58 to $4.83 and adjusted EPS of $5.75 to $6.00. Wall Street is currently looking for about $5.90. CVS also projected full year operating cash flow of $6.5 billion. That would be down from $9.1 billion for the full year of 2024. I think the street is generally relieved that guidance was not pulled back to any degree.
The Current Quarter
CVS will report first quarter earnings on or about May 1. Wall Street is expecting to see an adjusted EPS of roughly $1.62 on revenue of $93.07 billion. That would be up from the year-ago comp of $1.31, while reflecting year-over-year sales growth of more than 5.2%. Even better, of the 15 sell-side analysts that I can find that track this stock, 13 have increased their earnings estimates for CVS for the period since it started.
Charts
Readers will see that with this morning's pop, CVS has broken out of a downturn that had been set up by not one, but two bearish technical patterns, a double top and a rising wedge. With the stock now trading above its 50-day and 200-day simple moving averages, these patterns are negated. Now, look for the daily Moving Average Convergence Divergence indicator to go into a fully bullish posture when the 12-day exponential moving average overtakes the 26-day EMA.
Additionally, readers will also see that this morning, CVS stock is flirting with the retaking of the half-way back point or 50% retracement of the late 2022 through late 2024 selloff. Holding that level, which is right around $70, would be key. I think this stock is very likely a "buy" at least technically if this can be done.
The "double top" level of roughly $76, which would also be a 61.8% Fibonacci retracement of that same selloff, is the next pivot. That pivot could produce a target price of $87 or thereabouts, in my opinion.
At the time of publication, Guilfoyle had no position in any security mentioned.
