CHICAGO, Dec. 18, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the CVS Health Corporation (NYSE:CVS-Free Report), Medtronic Inc. (NYSE:MDT-Free Report), Medical Inc. (NYSE:STJ-Free Report) and Rite Aid Corp. (NYSE:RAD-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Wednesday's Analyst Blog:
CVS Up on Dividend, Fresh Buyback, Outlook
The share price of Rhode Island-based integrated pharmacy health care service provider CVS Health Corporation (NYSE:CVS-Free Report) moved up 2.7% to eventually close at $92.31 yesterday, following the company's announcement of a hike of 27% in its quarterly dividend, the approval of a new share repurchase program worth up to $10 billion and an updated 2015 guidance.
Following this positive piece of news, the company touched a 52-week high of $94.61 on Dec 16, 2014, closing the day's trading a tad lower at $92.31.
As declared, CVS Health will raise its quarterly cash dividend by 27% to 35 cents per share from the prior payout of 27.5 cents. The increased dividend will be paid on Feb 2, 2015 to shareholders of record on Jan 22.
This dividend hike has resulted in a rise of 30 cents per share in the company's annualized payout to $1.40 per share; translating into a dividend yield of 1.5%, up from its current yield of 1.22%. This will help the company to remain on track to reach its dividend payout ratio target of 35% in 2018.
CVS Health also announced that it can now utilize outstanding common stock worth up to $10 billion to repurchase its shares under the new buyback program, which is effective immediately and is expected to be completed over a multi-year period. The company plans to combine this program with its existing share repurchase program worth $2.7 billion, resulting in availability of $12.7 billion of common stock in total for CVS Health's share repurchases.
During this Analyst Day meet, CVS Health also provided its guidance for 2015. Management expects to deliver adjusted earnings per share from continuing operations of $5.05 to $5.19 in 2015, reflecting an increase of 12.5% to 15.75% (excluding the loss on early extinguishment of debt in 2014). The current Zacks Consensus Estimate of $5.11 for 2015 lies within the guidance range. On a reported basis, the company expects earnings per share from continuing operations in the range of $4.77 to $4.91 in 2015.
CVS Health also expects to generate substantial free cash flow of $5.9 billion to $6.2 billion in 2015, and cash from operations of $7.6 billion to $7.9 billion in 2015. This guidance assumes the completion of $6 billion in share repurchases during 2015.
Another noted player in the medical sector – Medtronic Inc. (NYSE:MDT-Free Report) – also raised its quarterly dividend by 9% to 30.5 cents in Jun 2014. Likewise, St. Jude Medical Inc. (NYSE:STJ-Free Report) also hiked its dividend payout by 8% to 27 cents in Feb 2014. Currently, both Medtronic and St. Jude Medical's dividend yield of 1.7% and 1.6%, respectively, compare favorably with that of CVS Health.
We believe the dividend increase highlights CVS Health's commitment to deliver incremental returns to investors leveraging a solid balance sheet, healthy free cash flow and earnings. CVS Health exited the third quarter of 2014 with cash and cash equivalents of $1.6 million, lower than $4.1 million as of Dec 31, 2013.
Moreover, frequent share repurchases are expected to boost earnings as well as shareholders' value in the near term.
Zacks Rank
CVS Health retains a Zacks Rank #2 (Buy), while both St. Jude Medical and Medtronic carry a Zacks Rank #3 (Hold). A better-ranked Retail-Drug Store stock worth considering is Rite Aid Corp. (NYSE:RAD-Free Report), with a Zacks Rank #1 (Strong Buy).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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