Corporate executives and directors tend to have an information advantage over other investors. If these insiders are buying company stock, it is more often than not a positive development.
Here, we are going to highlight an interesting insider transaction at CVS Health Corp (CVS:US). CVS Health is an integrated American health care provider that provides its services through a number of different brands. Its main brands are CVS Pharmacy, which is a retail pharmacy chain, CVS Caremark, a pharmacy benefits manager, and Aetna, which provides health insurance. It’s traded on the New York Stock Exchange and currently has a market capitalization of $107 billion.
CVS Health Corp: Insider Buying
Form 4 filings show that on 5 August, a Director at CVS Health, Edward Ludwig, purchased 3,000 CVS shares at a price of $79.55 per share. This purchase cost the insider approximately $250,000 and increased his stake by around 20%.
Experienced Industry Veteran
Mr. Ludwig has a very impressive background in the healthcare sector. He is currently the lead Director at Aetna and has been a Director since 2003. From 2000 up until 2011, he was the CEO of global medical technology company Becton, Dickinson and Company. He also carried out the role of Chairman between 2002 and 2012. Currently, he is also the Lead Independent Director at Boston Scientific Corporation.
What stands out about this trade is that the insider has committed close to $250,000 in capital and increased his holding by 20%. This suggests he is confident in the future prospects of CVS Health. Our data shows that he picked up 3,000 shares in the middle of February at levels 10% lower than where the shares are priced currently, which suggests that he has an aptitude for trading the shares.
Strong Revenue Growth
CVS Health produced a very impressive set of Q2 results. Total revenues for the period climbed 11.1% higher year on year to $72.6 billion. This meant revenue for the half-year came in at $141.7 billion which was an increase of 7.3% versus H1 2020. GAAP adjusted EPS was $4.46 for the half-year. The generation of $8.7 billion cash flow during H1 2021 allowed $5.4 billion of long-term debt to be repaid.
As a result of these strong results, the adjusted EPS guidance for the full year was increased to a range of $7.70 to $7.80 from $7.56 to $7.68. Cash flow from operations was also guided upwards from $12.0 billion to $12.5 billion, to $12.5 billion to $13.0 billion.
“We delivered another quarter of strong results and once again raised our outlook for the year. This quarter was highlighted by broad sales and earnings outperformance, as well as sequential operating margin improvement. We continue to play a critical role in helping America prevail against the pandemic while demonstrating the effectiveness of our unique business model,” said CVS Health President and CEO Karen S. Lynch.
Having reviewed these results and the positive comments from the CEO, we see the recent insider trading here as bullish. It would suggest that the Director believes that the momentum within the business will continue and that the share price has further to run.