On Wednesday, an analyst from Argus revised the stock price target for CVS Health (NYSE:CVS), decreasing it to $80 from the previous $100, yet retained a Buy rating on the stock. The adjustment follows CVS Health's first-quarter earnings for 2024, which fell short of market expectations, prompting the company to revise its guidance downward.
The new earnings per share (EPS) forecast for 2024 is set at "at least $7.00," a dip from the "at least $8.30" projected in February and the "at least $8.50" anticipated during the Investor Day on December 5.
The company experienced higher-than-anticipated usage in the Medicare Advantage plans offered through its Health Care Benefits segment. Consequently, CVS now projects its adjusted operating income for 2024 to be at least $14.75 billion, a reduction from the $16.9 billion estimate provided in February and the initial $17.24 billion outlook from December.
Despite the lowered expectations, CVS has communicated a strong commitment to margin improvement. The stock is currently trading at 8 times the analyst's reduced EPS estimate for 2024. The dividend yield stands at 4.75%, and the dividend payout is considered to be secure, representing less than 40% of the revised EPS forecast.
The analyst acknowledges the potential in CVS shares even with the tempered estimates, deeming the new $80 stock target price as reflective of the stock's value. Still, the analyst also noted that a reassessment of the stock price target and rating could be necessitated if CVS fails to maintain its investment-grade credit ratings, if further significant adjustments to estimates are required, or if there is no clear trajectory towards mid-single-digit earnings growth.
InvestingPro Insights
In light of CVS Health's revised earnings guidance and the subsequent price target adjustment by Argus, insights from InvestingPro provide additional context for investors considering CVS stock.
The company's market capitalization stands at $69.97 billion, and it is trading at a compelling P/E ratio of 9.76, which dips even lower to 8.66 when adjusted for the last twelve months as of Q1 2024. This valuation suggests that the stock may be undervalued relative to near-term earnings growth, an observation supported by a low PEG ratio of 0.11 for the same period.
InvestingPro Tips highlight that CVS is a prominent player in the Healthcare Providers & Services industry, which is significant given the company's recent performance in its Health Care Benefits segment.
Moreover, the stock's RSI indicates it is in oversold territory, which could be an attractive entry point for investors. With a strong dividend history, maintaining payments for 54 consecutive years, and a current yield of 4.77%, CVS remains an interesting option for income-focused portfolios.
For those seeking a deeper analysis, there are 12 additional InvestingPro Tips available at https://www.investing.com/pro/CVS. These tips may further inform investment decisions, particularly in the context of CVS's current trading near its 52-week low. To access these insights and more, investors can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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