Options Trade – CVS Health Corp (NYSE:CVS) Calls
Monday, February 09, 2015

**OPTIONS TRADE: Buy the CVS May 2015 100.000 call (CVS150515C00100000) at or under $3.90, good for the day. Place a protective stop loss at $1.55 and a pre-determined sell at $7.00.

by Ian Harvey

February 09, 2015


CVS Health Corp (NYSE: CVS), formerly CVS Caremark Corporation, is a pharmacy healthcare provider in the United States which has three business segments: Pharmacy Services, Retail Pharmacy and Corporate, that will announce fourth-quarter results before the market opens on February 10. Headed into the quarterly report, analysts have forecast earnings of $1.21 per share, up from $1.12 during the same period last year.

CVS continues to be one of the strongest stocks in the market, and has notched a 4.2% gain so far in 2015. The company benefits from improved consumer confidence, as well as a rising number of insured Americans as a result of the Affordable Care Act. The company has a very bright future as a result of an aging population that will require more health care products moving forward.

Technical Details

The stock’s 50-day moving average is $98.20 and its 200-day moving average is $86.84.

The company has a market cap of $116.0 billion and a P/E ratio of 26.01.


CVS Health Corp last released its earnings data on Tuesday, November 4th. The company reported $1.15 earnings per share (EPS) for the quarter, beating the consensus estimate of $1.13 by $0.02. The company had revenue of $35.00 billion for the quarter, compared to the consensus estimate of $34.74 billion.

During the same quarter in the previous year, the company posted $1.09 earnings per share. The company’s revenue for the quarter was up 9.7% on a year-over-year basis. Analysts expect that CVS Health Corp will post $4.50 EPS for the current fiscal year.

Analysts Opinions

On the 21st January, 2015, TheStreet Ratings team rated CVS HEALTH CORP as a Buy with a ratings score of A+. TheStreet Ratings Team had this to say about their recommendation:-

"We rate CVS HEALTH CORP (CVS) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team:-

• The revenue growth came in higher than the industry average of 1.2%. Since the same quarter one year prior, revenues slightly increased by 9.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.

• Compared to its closing price of one year ago, CVS's share price has jumped by 42.29%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, CVS should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.

• CVS HEALTH CORP's earnings per share declined by 20.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CVS HEALTH CORP increased its bottom line by earning $3.75 versus $3.03 in the prior year. This year, the market expects an improvement in earnings ($4.49 versus $3.75).

• The current debt-to-equity ratio, 0.34, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that CVS's debt-to-equity ratio is low, the quick ratio, which is currently 0.66, displays a potential problem in covering short-term cash needs.

• The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Food & Staples Retailing industry and the overall market, CVS HEALTH CORP's return on equity is below that of both the industry average and the S&P 500.

The company has been also been the subject of a number of other research reports:-

• Analysts at Stephens initiated coverage on shares of CVS Health Corp in a research note on Wednesday, January 21st. They set an “overweight” rating on the stock.

• Analysts at Goldman Sachs upgraded shares of CVS Health Corp from a “neutral” rating to a “buy” rating and raised their price target for the stock from $95.00 to $113.00 in a research note on Wednesday, January 21st.

• Analysts at JPMorgan Chase & Co. raised their price target on shares of CVS Health Corp from $108.00 to $116.00 and gave the company an “overweight” rating in a research note on Thursday, January 8th.

• Finally, analysts at Bank of America set a $104.00 price target on shares of CVS Health Corp and gave the company a “buy” rating in a research note on Friday, January 2nd.

Two research analysts have rated the stock with a sell rating, three have assigned a hold rating and fourteen have given a buy rating to the company’s stock. The stock currently has an average rating of “Buy” and an average price target of $93.10.


Analysts have forecast Q4 earnings to rise 8%, but if history is any indication, the increase could be even higher. CVS has posted stronger than expected numbers seven of the last eight quarters, and it is expected that another upbeat report will occur this quarter as well. Look for strong numbers, and the stock hitting a new all-time high on the results.

Therefore, based on the facts above the following options trade is recommended…..

**OPTIONS TRADE: Buy the CVS May 2015 100.000 call (CVS150515C00100000) at or under $3.90, good for the day. Place a protective stop loss at $1.55 and a pre-determined sell at $7.00.

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