CVS shares fall the most in 15 weeks on Thursday despite revenue and earnings beat, company plans minimum wage raise

February 9, 2018 8:29 am

CVS Health Corp’s (CVS) fourth-quarter revenue and earnings, reported on Thursday, outstripped market expectations. However, the company revised down its full-year 2018 operating profit forecast. The pharmacy benefits manager also said it would raise the hourly wage for its employees and offer a paid parental leave program by utilizing part of $1.2 billion in savings that resulted from the US tax code reform.

CVS shares closed lower for the third time in the past five trading sessions on Thursday. It has also been the steepest daily loss since October 27th 2017. The stock went down 5.11% ($3.80) to $70.55 at the close, which has been a price level not seen since December 14th ($70.47).

In the week ended on February 4th the shares of the pharmacy benefits manager lost 6.78% of their market value compared to a week ago, which marked the first drop in the past five weeks. It has also been the worst performance since the week ended on October 29th 2017.

The stock has extended its loss to 10.34% so far during the current month, following an 8.54% surge in January. The latter has been the third gain out of seven months.

For the entire past year, the shares of the NYSE-listed company fell 8.12% following another 19.29% retreat in 2016.

The minimum hourly wage for workers is to be raised to $11, effective this April.

“With $1.2 billion in cash benefits from the Tax Cuts and Jobs Act, we will be able to make strategic investments in our business in 2018 to stimulate greater growth over the longer term”, David Denton, CVS Chief Financial Officer, said in a statement, cited by Reuters.

CVS Health’s total revenue went up 5.3% year-on-year to $48.4 billion during the fourth quarter, while surpassing the median analyst estimate of $47.5 billion.

Revenue at CVS pharmacy services unit grew 9.2% year-on-year to $34.2 billion during the latest quarter, mostly due to pharmacy network growth and specialty pharmacy claims.

At the same time, revenue at the company’s retail pharmacy unit went up a mere 0.3%, following a rise in the generic dispensing rate and reimbursement pressure.

Meanwhile, CVS Health’s net income attributable to shareholders was reported to have surged to $3.3 billion ($3.22 per share) during the fourth quarter, from $1.7 billion ($1.59 per share) during the same period a year ago, supported by $1.5 billion in income tax benefits.

The company’s earnings per share, excluding the tax reform benefits, were reported at $1.92 during the latest quarter, which outstripped the median analyst forecast ($1.89 per share).

On the other hand, the pharmacy benefits manager revised its adjusted consolidated operating profit growth forecast for the full year to a range of -1.5% to +1.5%. CVS had previously forecast operating profit growth within the range of 1% and 4%.

According to CNN Money, the 22 analysts, offering 12-month forecasts regarding CVS Health Corp’s stock price, have a median target of $90.00, with a high estimate of $100.00 and a low estimate of $73.00. The median estimate is a 27.57% surge compared to the closing price of $70.55 on February 8th.

The same media also reported that 19 out of 26 surveyed investment analysts had rated CVS Health Corp’s stock as “Buy”, while 7 – as “Hold”.

Daily and Weekly Pivot Levels

With the help of the Camarilla calculation method, today’s levels of importance for the CVS stock are presented as follows:

R1 – $70.95
R2 – $71.35
R3 (Range Resistance – Sell) – $71.76
R4 (Long Breakout) – $72.96
R5 (Breakout Target 1) – $74.37
R6 (Breakout Target 2) – $74.94

S1 – $70.15
S2 – $69.75
S3 (Range Support – Buy) – $69.34
S4 (Short Breakout) – $68.14
S5 (Breakout Target 1) – $66.73
S6 (Breakout Target 2) – $66.16

By using the traditional method of calculation, the weekly levels of importance for CVS Health Corp (CVS) are presented as follows:

Central Pivot Point – $78.64
R1 – $81.69
R2 – $86.94
R3 – $89.99
R4 – $93.05

S1 – $73.39
S2 – $70.34
S3 – $65.09
S4 – $59.85

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