Added More Shares After CVS Earnings Drove The Stock Down 15%

Q3 Earnings Results

CVS Health (CVS) Q3 results: Revenues: $44,615M (+15.5%); Operating Income: $2,817M (+20.8%); Net Income: $1,542M (+24.7%); EPS: $1.43 (+30.0%); Non-GAAP EPS: $1.64 (+28.1%); Quick Assets: $2,263M (-11.2%); CF Ops: $7,948M (+64.2%).

Q4 Guidance: GAAP EPS: $1.52 – 1.58; Adjusted EPS: $1.64 – 1.70.

2016 Guidance: GAAP EPS: $4.84 – 4.90 from $4.92 – 5.00; Adjusted EPS: $5.77 – 5.83 from $5.81 – 5.89; CF Ops: $9.3B- 9.5B; FCF: $6.8B – 7.0B.

2017 Preliminary Outlook: GAAP EPS: $5.16 – 5.33; Non-GAAP EPS: $5.77 – 5.93.

Shares are down 15% premarket.


At first glance – all good right?  Revenues up 15.5%, earnings up 30% year over year and the company guided to a good Q4.  Shares down 15% premarket!?!?  So the big story is how management guided down substantially for 2017.  It appears rival Walgreens took some business unexpectedly which is expected to drive overall earnings down.  Still, taking the lower end of guidance, the stock is trading at 15x 2017 GAAP earnings.  It only looks cheaper at either the higher end of guidance or using non-GAAP figures.

Also of note, the company authorized an additional $15B in stock buybacks which at current prices could be one of the better executed buybacks in recent history.  Also the company is due to raise their dividend in December!

Simply Safe Dividends


The company ranks extremely highly in the Simply Safe Dividends database.  They’ve had incredible 20% yearly growth for 5 years now and in terms of free cash flow, the payout is quite low.  Additionally with the expected hike coming the overall yield figure should see a nice boost.  Long story short, I used the opportunity presented to buy some more shares.  I’ll collect a very safe and growing dividend while the story line plays out.

Fast Graphs

Here is also a Fast Graph showing the companies now undervaluation compared to historical norms.


A good recent article about CVS can be found here.