CVS - CVS Health: A Terrible Earnings Report But An Undervalued Stock

2024-05-04 06:16:07 ET

Summary

• CVS Health reported dismal earnings on May 1st, substantially dropping the stock price, resulting in the largest one-day drop on record.
• While revenues nearly met consensus expectations, current quarter EPS and forward earnings were slashed, roughly by the same amount as the stock price.
• The decline has been fairly orderly and an immediate bounce in the stock price is not expected.
• Longer term, CVS Health is at a compelling valuation, but catalysts to send the stock higher will take some time to unfold.
• CVS Health is presently a HOLD and this article attempts to present a balanced picture, so long-term investors can consider the risks and rewards evenly.

CVS Health (CVS) reported first-quarter net income well below Wall Street's expectations, while also lowering next year’s guidance. The stock traded sharply lower after the May 1st report, down nearly 20% during parts of the day before closing 17% lower, a record one-day loss for the company. I have a small long position in CVS Health and I am reviewing the position as I try to decide if the stock is a buy, sell or hold....

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