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

Macquarie analysts Bob Summers and Max Rakhlenko are expecting CVS Health Corp CVS 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.

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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.