Shares of drugstore chain CVS Health (CVS -0.22%) are higher by nearly 4% as of 3:24 p.m. ET Tuesday following an important update from the company. While the bulk of today's press release lays out plans to overhaul its prescription drug-pricing paradigm and improve its primary care operation, investors are most likely responding to the company's bullish guidance for fiscal/calendar 2024.
Meet the (sort of) new-and-improved CVS
The announcement was made this morning in conjunction with today's Investor Day event held in Boston, Massachusetts. In the coming year, the company's pharmacy customers will see more detailed information regarding their prescription-drugs' costs as well as their insurer's portion of the total cost; in some cases, customers may see lower prescription-drug prices. Customers using this information will also enjoy a more convenient integration of CVS Health's current clinical and cost-combatting prescription drug-coverage plans as well as its specialty-care offerings.
More than anything, investors now know what to expect in the coming year. The drugstore chain anticipates turning a minimum of $366 billion worth of revenue into adjusted net income of $17.2 billion, translating into per-share income of $8.50. Analysts had been calling for profits of $8.51 per share on consensus revenue of $345.8 billion.
Neither bottom-line projection is better than a share price between $8.50 and $8.70 the company expects to report with its full-year figures in February. But the sales expectation is measurably stronger than the average estimate of $353.7 billion for the current fiscal year. It's also better than CVS' projected 2023 range of between $351.5 billion and $357.3 billion.
The company also raised its quarterly-dividend payment to $0.665 per share beginning early next year, up 10% from its current quarterly payment of $0.605.
Another reason to own the stock
The organizational updates and drug-pricing disclosures certainly help CVS customers. At the same time, the increased dividend and better-than-expected guidance favor CVS shareholders. However, none of Tuesday's announcements dramatically bolster the bullish thesis on CVS stock.
And yet, it's still a buy while it's still so near multiyear lows reached in late October.
There's no denying the United States' pharmacies are in an increasingly tight spot, pressured by a combination of drug-price hawks, pharmaceutical companies, shareholders, and consumers. CVS is no exception to this dynamic.
With the stock down more than 30% from last December's peak, the bears have arguably overshot their target. Even analysts -- many of whom have been no great friend of drugstore chains in recent years -- are firmly bullish. Nineteen of the 27 analysts currently monitoring CVS rate its stock as an outright buy and sport a consensus price target of $86.95. That's more than 20% above the stock's present price.
