What happened

You might think that a healthcare leader like CVS Health (NYSE:CVS) would have been poised to outperform during the COVID-19 pandemic, but that has not been the case so far. Shares of the nation's largest drugstore chain and the parent of health insurer Aetna slipped 13% through the first six months of the year, according to data from S&P Global Market Intelligence, as pandemic-related uncertainty reigned over expectations.

Shares of CVS tracked similarly to the S&P 500 but underperformed the broad-market index for much of the year.

CVS Chart

CVS data by YCharts

So what

CVS stock traded mostly flat through the first weeks of the year as the pharmacy began to roll out its new HealthHUBs, a cornerstone of its strategy, and posted fourth-quarter earnings in February that were better than expectations. The company saw 22.9% revenue growth to $66.9 billion as it got a boost for the last time from the Aetna acquisition, topping estimates at $63.97 billion. Adjusted earnings per share fell from $2.14 to $1.73, in part because of share dilution form the Aetna deal, but that beat expectations at $1.69. Citing "significant progress" made in 2019, CEO Larry Merlo said the company was raising its guidance for 2020, calling for adjusted EPS between $7.04 and $7.17, essentially flat with $7.08 in 2019.

A CVS pharmacist greeting a little girl

Image source: CVS Health.

The stock then plunged in March along with the rest of the market, though CVS also announced that it would hire 50,000 new employees and begin opening up testing sites, showing that there was high demand for its services. At the same time, the company acknowledged headwinds caused in part by lower prescription volumes as Americans stayed home and put off doctor visits.

By the time CVS' first-quarter earnings report came around in May, its stock had regained some of those losses, and it again beat estimates with adjusted EPS of $1.91, up from $1.62 a year ago. However, the company did not raise its guidance, which may have disappointed investors.

Now what

Though the pandemic has driven additional retail sales for CVS, and the company has opened more than 1,000 testing sites, the crisis has forced it to suspend its HealthHUB rollout and focus instead on fighting the coronavirus. While the pharmacy chain still faces considerable uncertainty ahead, it should emerge from the pandemic in a competitively strong position. Trading at a P/E around nine, the stock looks cheap.