CVS Health (NYSE:CVS) is slated to release its third-quarter Fiscal 2022 results on November 2 before the market opens. Wall Street expects CVS to post adjusted earnings of $2.00 per share. Meanwhile, revenue is pegged at $76.78 billion, representing a year-over-year growth of 4%.
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Notably, CVS has a strong track record of reporting earnings beats. It has beaten estimates in all of the preceding eight reported quarters.
According to Credit Suisse analyst A.J. Rice, CVS’s 2024 target of double-digit EPS growth may be negatively impacted by Centene’s (NYSE: CNC) decision to grant its pharmacy benefit manager (PBM) contract to Cigna/Express Scripts (NYSE: CI) last week.
He stated, “Under the assumption that CVS will lose $30 bln of drug spend at 2% pre-tax margins would suggest a 3.5% EPS headwind or ~$0.35 EPS to our 2024 EPS of $9.90.”
Despite the contract loss, Rice reiterated a Buy rating on CVS Health stock with a price target of $117 (23.55% upside potential).
Is CVS a Good Stock to Buy?
As per Tipranks, the Wall Street community is clearly optimistic about the stock. Overall, the stock commands a Strong Buy consensus rating based on 11 Buys and two Holds. CVS Health’s average price target of $122 implies 28.83% upside potential from current levels.
Notably, CVS stock has a top-notch Smart Score of a “Perfect 10” on TipRanks, indicating that the stock has strong potential to outperform market expectations.
Conclusion: Consider Purchasing CVS Stock
CVS stock has remained resilient despite a tough macro backdrop. It has gained 5% over the past year versus the S&P, which is down 16% over the same corresponding period.
In terms of valuation, the stock is trading at 11x P/E. This represents an approximate 40% discount to its peer-group average of 19x.
Therefore, investors can think of buying the stock ahead of its earnings based on its discounted valuation compared to the peer group as well as the street’s confidence in the long-term growth potential of the stock.
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