Pharmacies were one of the great places to be back in 2020, and CVS (NYSE: CVS) was no exception at all. Enjoying the coveted designation of “essential” throughout the entire year, and able to benefit on both ends of the COVID-19 pandemic, the company turned in a bang-up fourth quarter that makes it clear CVS is one of the winners in the pharmacy market.
A Healthy Fourth Quarter by Any Standard
The numbers beat expectations on every front, as the reports noted. The company turned in $1.30 on its earnings per share figure, which was nicely above the $1.24 per share expected by Refinitiv polling. Revenue also turned in a beat, as the company brought in $69.55 billion against an expected $68.75 billion.
Net income did slip a bit, however, when compared to the previous year's figures. The company brought in fourth-quarter net income of $0.75 per share, which worked out to about $975 million. That's quite a ways down from the $1.74 billion turned in in the fourth quarter of 2019, which worked out to about $1.33 per share. The company even brought out full-year guidance for the 2021 fiscal year, reports noted, with earnings per share poised to fall in the $6.02 to $6.22 range, and cash flow between $12 billion and $12.5 billion.
Though foot traffic was down substantially as people stayed away in droves due to the nature of the pandemic, the company still managed to see some sales growth, especially in recent days. The fourth quarter featured same-store sales that were up 5.3% against the fourth quarter of 2019, as pharmacy sales were up 7.5% but front-of-store sales dropped 1.8%, a reflection of people looking to get prescriptions filled and then promptly leave.
A Happy, Healthy Analyst Pool
Better yet, the consensus figures among the analyst community, as revealed by our latest research, shows that this stock is well worth keeping on hand. Though recent weeks have seen analysis turn slightly bearish, the company has been rated a “buy” for the last six months.
Six months ago, the company had three “hold” ratings, 13 “buy” and two “strong buy” ratings to its credit, and three months ago, things remained about the same as two of the “buy” ratings departed the field. A further loss came a month ago, when the company had three “hold”, 12 “buy” and just one “strong buy” to its credit. Now, the “strong buy” side has departed altogether, leaving us at three “hold” and 12 “buy” ratings.
The price target has increased through much of the last six months, though it has dipped lately. Six months ago, the price target stood at $82.13, before going up to $82.43 three months ago. Another jump came a month ago as the company saw $82.93, but now, the price target has fallen to $82.08, which is less than it was even six months ago.
A Declining Demand Ahead?
Much of the last year has been a perfect setup for CVS, and other pharmacy stocks like Walgreens (NASDAQ: WBA) and Rite Aid (NYSE: RAD). First, we had a disease of then-unknown impact—COVID-19—hit and make people hesitant about going anywhere, but rather engaging in the standard disease preventative measures. We also saw hospitals close to all but COVID-19-related issues, which sent accompanying demand for prescriptions related to most anything else suffer some demand loss. That in turn was likely absorbed on some level by the general preventative supply purchases, but it didn't last long. Within about two months or so, hospitals began to reopen to anything non-COVID-19 related, and that brought back prescription demand with it. Then the COVID-19 vaccines started up, and CVS was there too.
Basically, at every step of the pandemic, CVS had a position ready to go, which allowed it to turn in some fantastic numbers this year. If the vaccines work as expected, and the therapeutic measures kick in as well, then the demands on places like CVS may start to fall off. Thus, anyone who buys in on CVS right now will likely do well but will need to keep a weather eye on the stock to make sure they don't lose more ground than they'd like.
Demand conditions are likely to start shifting again, and while CVS—and its various competitors—can and should prepare accordingly, odd events happen, and may drop the bottom out from this stock unexpectedly. So buy in the short-term, but watch it as it goes to long-term.
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