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Macquarie Expecting Strong Q1 From CVS 'Despite Transitory Flu Pressure'

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Macquarie analysts Bob Summers and Max Rakhlenko are expecting CVS Health Corp CVS 0.95% to report strong first quarter financial results on Tuesday morning, even in spite of the headwinds posed by a transitory weak flu season and persisting pressure from reimbursement rates.

For the first quarter, the analysts are modeling earnings of $1.16 per share, in line with the Street’s consensus estimates, and 2.4 percent same-store sales growth, comprised of 3 percent growth in pharmacy sales and 1percent front-end growth. On the other hand, they believe that not only the weak flu season will impact negatively on Rx same-store sales, moderating implied drug pricing is also likely to take a toll on results.

Related Link: CVS And Whole Foods To Set The Stage For Retail Earnings?

Overall, the firm remains bullish heading into the earnings call due to:

  • 1) An realistic and reachable EPS target
  • 2) Sustained integration of recently acquired businesses
  • 3) “Further opportunities for accretive cross-vertical consolidation”
  • 4) A business model that is generally resistant to recession, and has no FX exposure.

Macquarie experts reiterated an Outperform rating and $115 price target on shares, “and would consider any price weakness associated with a weak transitory flu season weighing on retail and pharmacy comps as buying opportunities.”

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.

DateFirmActionFromTo
Mar 2016Credit SuisseAssumesOutperform
Mar 2016BarclaysAssumesOverweight
Feb 2016Atlantic EquitiesInitiates Coverage onOverweight

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