Markets

CVS Health to report earnings August 8

What's Happening

Drug store chain CVS Health ( CVS ) will report its second-quarter results before the market open August 8. Analysts expect earnings of $1.61 per share, versus $1.33 during the same period last year. CVS stock has lost 12.1% on the year.

Technical Analysis

CVS was recently trading at $64.65 down $19.35 from its 12-month high and $4.51 above its 12-month low. InvestorsObserver's Stock Score Report gives CVS a 15 long-term technical score and a 16 short-term technical score. The stock has recent support above $62 and recent resistance below $66. Of the 16 analysts who cover the stock 11 rate it Strong Buy, 2 rate it Buy, and 3 rate it Hold. CVS gets a score of 41 from InvestorsObserver's Stock Score Report.

Analyst's Thoughts

CVS took a big hit earlier in the year on news that e-commerce giant Amazon.com ( AMZN ) was looking to make an aggressive move into the pharmaceutical sector with its acquisition of Pill Box. The market got spooked and sold off the big drug store stocks, but it appears the worst is behind CVS and shares have been stable for the last several months as the market comes to terms with the fact that it will be a long road for Amazon to really shake up the sector, and that a lot of consumers prefer to purchase their prescriptions in person where they can discuss any questions with a pharmacist. While Amazon does face an uphill battle, the success the company has had in its previous endeavors is hard to ignore. With such uncertainty surrounding the sector, CVS is going to need to consistently impress the market for shares to make back their previous losses. The street expects a small earnings beat, with a whisper number of$1.63 for the quarter, which is two pennies above the general consensus. If CVS is able to hit that whisper number the stock should make a nice move higher, but any signs of weakness could drive shares sharply lower. Shareholders should have a clear exit strategy in place just in case the results fail to hit analyst estimates.

Stock Only Trade

Bullish Trade

If you want a bullish hedged trade on the stock, consider a 9/21/18 55/57.5 bull-put credit spread for a $0.20 credit. That's a potential 8.7% return (64.8% annualized*) and the stock would have to fall 11.5% to cause a problem.

Bearish Trade

If you want to take a bearish stance on the stock at this time, consider an 9/21/18 72.5/75 bear-call credit spread for a $0.20 credit. That's a potential 8.7% return (64.8% annualized*) and the stock would have to rise 12.2% to cause a problem.

Covered Call Trade

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Originally published on InvestorsObserver.com


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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