CVS Health Stock Drops After Cutting Profit Forecast Again

Outside of a CVS Pharmacy at night with store sign lit up in red — (Image credit: Joe Raedle/Getty Images)

CVS Health (CVS) stock is in negative territory Wednesday after the pharmacy chain and healthcare benefits provider reported mixed results for its second quarter and slashed its full-year profit forecast.

In the three months ended June 30, CVS said its revenue increased 2.6% year-over-year to $91.2 billion, driven by growth in its Health Care Benefits and Pharmacy & Consumer Wellness segments. However, its earnings per share (EPS) decreased 17.2% from the year-ago period to $1.83, primarily due to a decline in operating income in its Health Care Benefits segment.

"We have many points of differentiation that position us to win now and into the future," said CVS CEO Karen Lynch in a statement. "Our innovation is accelerating more transparent pharmacy reimbursement models, increasing the use of biosimilars, and providing better patient outcomes through our connected health care delivery assets."

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The results were mixed compared with what analysts were expecting. Wall Street anticipated revenue of $91.5 billion and earnings of $1.73 per share, according to Yahoo Finance.

For a second consecutive quarter, CVS reduced its full-year profit forecast. The company now anticipates earnings per share to arrive between $6.40 to $6.65, down from its previous forecast of at least $7.00. It's also guiding for cash flow from operations of approximately $9 billion, down from its previous forecast of at least $10.5 billion.

"The Company's guidance revision reflects continued pressure in the Health Care Benefits segment, partially offset by strong performance in the Health Services and Pharmacy & Consumer Wellness segments," CVS said.

Is CVS stock a buy, sell or hold?

CVS Health is down more than 20% for the year to date, but Wall Street remains bullish on the healthcare stock. According to S&P Global Market Intelligence, the consensus analyst target price for CVS stock is $67.74, representing implied upside of more than 17% to current levels. Additionally, the consensus recommendation is Buy.

Still, there are some on Wall Street that are hesitant. Financial services firm UBS Global Research, for instance, has a Neutral rating (equivalent to a Hold) and a $60 price target. And UBS analyst Kevin Caliendo issued a stern warning to investors ahead of earnings.

"It is a 'stay away' on this print," Caliendo wrote in an August 5 note. Analysts' consensus view was "challenging," he said. "The potential range of outcomes here is meaningful, thus while the stock is cheap relative to managed care peers, we have little conviction in the near-term outlook."

Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.