Why CVS Stock Skyrocketed on Wednesday

One of the healthier stocks in the healthcare sector on Wednesday was its retail king, CVS Health (NYSE: CVS). The company took the wraps off its first-quarter results, and investors were heartened by its performance. On the back of twin beats on key fundamentals, market players pushed CVS stock up by nearly 8% that trading day.

Good for what ails a stock portfolio

CVS reached nine-figure territory with that quarter's revenue, which came in slightly over $100 billion. That represented a year-over-year improvement of 6% -- fairly robust for a company as mature as this in the retail space.

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Net income under generally accepted accounting principles (GAAP) leaped by 66% to slightly below $2.96 billion. On a non-GAAP (adjusted) basis, CVS's profitability was $2.57 per share, up from the year-ago result of $2.25.

Analysts underestimated the company's growth potential. For the quarter, their consensus revenue estimate was barely over $95 billion, while the collective adjusted earnings per share (EPS) expectation was $2.21.

In its earnings release, CVS said the recent success was driven by its strong presence in the pharmacy market and its unique structure. It quoted CEO David Joyner as saying that the company "continues to provide what people want most from healthcare: a connected, convenient, cost-effective engagement experience across our unique collection of businesses."

Rocking with a raise

Compounding the very convincing double beat on analyst projections, CVS also raised its bottom-line guidance. It's now projecting adjusted EPS of $7.30 to $7.50, well up from the previous range of $7 to $7.20. As for revenue, management anticipates it will amount to at least $405 billion.

CVS is not only more prominent due to the collapse of longtime rival Rite Aid last year, but also benefits from a synergistic set of products and services for its customers, as Joyner said. On top of that, the U.S. population is getting older and in greater need of medications. I feel that as long as CVS continues on its current path and remains a tier above its competitors, its stock will do well.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.