By Paul R. La Monica
CVS Health is the only major publicly traded bricks-and-mortar pharmacy chain left standing. It's worth a look as it gets set to report earnings.
CVS isn't the easiest stock to analyze. There are its namesake drugstores, but also pharmacy-benefits manager Caremark, insurer Aetna, primary-care center Oak Street Health, and in-home services provider Signify Health. That gives the company a lot of different revenue streams, but makes finding comparisons difficult. Still, the stock is up 26% over the past year, thanks largely to a 17% spike in April.
That complexity -- a complaint almost as common as customer gripes about the company's comically long receipts -- are part and parcel for the company, so investors will just have to deal with it when CVS releases first-quarter earnings on May 6. Wall Street is expecting a profit of $2.18 a share, down 3% from last year, on sales of $95 billion, up less than 1%, not exactly a blockbuster.
The stock, however, hasn't been acting like a slow-growth value trap. Maybe that's because it isn't one. Consensus estimates call for a 6% increase in earnings for the full year and 14% the following year. Those gains will be driven by strength across all its businesses. The insurance unit should get a lift from a planned increase in Medicare Advantage payments, something that's given a boost to stocks across the sector, including Humana and UnitedHealth Group. Both companies recently reported earnings and each of them stressed the importance of increasing profit margins for Medicare Advantage membership plans.
CVS's drugstore business, meanwhile, should continue to gain prescription market share due to the shutdown of former competitor Rite Aid last year and more store closures from Walgreens Boots Alliance, even as it faces challenges from Amazon.com and Walmart. "We believe the earnings power story is meaningfully underappreciated," writes Leerink Partners analyst Michael Cherny in a recent report.
Still, investors' concerns about how unwieldy CVS has become haven't gone away entirely. The stock trades at just 11 times earnings estimates for the next 12 months, much cheaper than UnitedHealth and Humana, which trade at 19 and 22 times, respectively. A breakup to unlock its value doesn't look likely. While there were reports in the fall of 2024 that CVS was considering a split, that speculation has died down following the departure of then-CEO Karen Lynch in October of that year and the promotion of David Joyner to CEO.
Cherny, for his part, thinks that CVS is worth more together than on a sum-of-the-parts basis. "The totality of CVS has better long-term upside potential than what we feel is currently factored into the stock," he writes.
CVS doesn't need a lot of multiple expansion for the stock to go up. UBS analyst Kevin Caliendo has a $97 price target on the stock, about 16% higher than its current $83.90, based on a projected price/earnings ratio of 12 times his earnings estimates for the next 12 months.
Maybe CVS has the right prescription after all.
Write to Paul R. La Monica at paul.lamonica@barrons.com
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May 01, 2026 21:30 ET (01:30 GMT)
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