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CVS Stock: Is It A Buy Right Now? Here’s What Earnings, Charts Show As CVS Customers Don Masks

CVS (CVS) stock edged up amid news that major pharmacy chains such as CVS Health would begin to provide Covid-19 vaccinations within days.




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State rules would continue to determine the order in which people could sign up within each state. Those rules are based on recommendations from the Centers for Disease Control and Prevention (CDC).

Access is limited due to low vaccine supplies.

The uptick in share price by CVS stock occurred despite expectations that CVS Health quarterly earnings will slide when the company reports, which is expected on Feb. 16.

CVS Stock Is Expected To Slide

CVS Health is seen reporting a 28% decline in earnings per share for the December 2020 quarter, according to IBD Stock Checkup.

Full-year EPS is expected to hit $7.45, according to analysis by MarketSmith. That would be a gain of 5%.

CVS stock was trading around 73 on Feb. 9 on below-average volume. They were trying to regain their 77.23 52-week high from Jan. 12.

Share price for CVS stock was up a low of 55.36 on Oct. 29.

CVS Jumped On Third Quarter Report

So is CVS stock a buy right now? Here’s what earnings and the chart show for the drugstore chain that owns health insurer Aetna.

While we’re awaiting the December quarter results, look at CVS’ third-quarter results, which it reported on Sept. 30. Revenues rose 3.5% to $67.1 billion. Adjusted earnings per share fell 10% to $1.66.

CVS earnings topped consensus expectations.

CVS stock’s current uptrend began shortly after that third-quarter earnings report.

CVS Raises Its Guidance

For the full year, CVS raised its adjusted EPS guidance range to $7.35 to $7.45, up from $7.14 to $7.27. It also raised its cash flow from operations guidance range to $12.75 billion to $13.25 billion, up from $11 billion to $11.5 billion.

CVS said, “While providing these updates to its full year guidance, the Company continues to acknowledge the inherent and unprecedented uncertainty surrounding the ongoing COVID-19 pandemic and its impact.”

The recent share price rise reverses a downtrend that began in early June.

CVS sports a 2.77% dividend yield.

CVS Stock Is Gaining Mutual Fund Support

What’s the longer-term prognosis for CVS stock?

The company isn’t a high-growth superstar. Earnings per share for the current year are expected to gain 5%, according to IBD Stock Checkup.

But the stock’s popularity with big-money investors is rising. The number of mutual funds holding shares rose to 2,750 as of Dec. 31. That was up from 2,594 a year earlier.

What CVS Health’s Chart Shows

CVS stock shares formed a double bottom and broke out Nov. 9 from what would be a 67.40 buy point. But for IBD readers to consider this a true buy, the stock would have to show additional pull-the-trigger traits.

Right now, shares are getting support at their 10-week moving average. MarketSmith analysis points to 77.13 a share to be the buy point. That is due to its cup with handle base formed last summer.

But is it really an entry point?

This Stock’s Technical Analysis

One problem is the stock’s consistent underperformance compared with the S&P 500 index.

A second key shortfall that keeps CVS stock from qualifying as a buy is its IBD Relative Price Strength Rating. That rating is a cadaverous 24. That’s worse than its sickly 51 rating in May.

The RS Rating tracks a stock’s share price performance over the past 52 weeks, and then compares the result to that of all other stocks. The rating shows CVS stock is a market laggard in terms of price performance. The Rating runs from 1 (worst) to 99 (best). A 99 rating means the stock is outperforming 99% of all stocks in terms of relative share price performance.

You should only buy stocks with an RS Rating of 80 or higher. The best stocks often rate over 90 at the time they launch a big price run. So CVS stock’s current rating simply does not cut it.

CVS shares have found support at their 50-day moving average. CVS regained its 200-day moving average in early November.

But those factors are not enough. Investors should wait for an RS line that is outperforming the S&P at least on a short-term basis.

CVS Stock Fundamentals: Little Good News

CVS stock fundamentals show several so-so traits. One is its IBD SMR Rating (Sales + Profit margins + Return on equity) of “B,” down from a “A” in early November. That proprietary rating shows that CVS beats 60% of all publicly traded stocks when it comes to IBD’s proprietary composite measurement of sales growth, profit margins and return on equity ratios.

CVS stock’s IBD Earnings Per Share (EPS) Rating is another blah spot. It is 79. That’s down from 93 in November.

That means that CVS earnings per share growth has outperformed 79% of all publicly traded companies. Stocks with EPS Ratings of 80 or better have the best chance of success.

Another Red Flag For CVS Health

CVS stock shows another key drawback. CVS has an IBD Composite Rating of 48. That means CVS Health shares lag 52% of all stocks on a number of technical and fundamental factors, including price performance and earnings.

Generally, CAN SLIM investors consider only stocks with a score of 90 or higher on the 1-to-99 scale.

Risks For CVS

CVS is threatened by risks. Like all pharmacies, CVS faces political pressure to lower drug prices.

Also, CVS faces competition from e-commerce titan Amazon.

CVS Health’s debt to equity ratio was 0.89 as of Sept. 30, according to macrotrends.net. That was down from 1.73 as of June 30, 2018. But it was up from 0.59 as of Dec. 31, 2017. That month, CVS announced its takeover of Aetna. Investors generally prefer a ratio of 2.0 or less.

CVS Stock Is Not A Buy

Bottom line: In some ways, CVS stock is a buyable stock. It formed a base. It broke out. It’s still within the 5% buy zone of an entry point around 77.

But it needs a better RS Rating and a better Composite Rating to really being buyable.

For now, you can do much better elsewhere.

To find the best stocks to buy or watch, check out IBD Stock Lists and other IBD content to find dozens more of the best stocks to buy or watch.

Please follow Paul Katzeff on Twitter at @IBD_PKatzeff for tips about personal finance and active mutual fund managers who outperform the market.

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