Buy CVS (CVS) Ahead of Earnings for Healthy Stock Gains - TheStreet

CVS Health (CVS) - Get Report is a market leader that is poised to grow both revenue and profits, while outperforming its peers. Investors should consider buying the stock, which reports third-quarter fiscal 2015 earnings results before the opening bell Friday.

For the quarter that ended in September, the average analyst earnings-per-share estimate calls for $1.29 a share on revenue of $37.77 billion, translating to year-over-year growth of 12% and 8%, respectively. For the full year, ending in December, earnings are projected to climb 14% year over year to $5.16 a share, while revenue of $151 billion would mark a year-over-year increase of 8.5%.

Headquartered in Woonsocket, R.I., CVS is the second-largest drug drugstore chain in the U.S. It has benefited from management's decision to rebrand the company with a heightened focus on health care. That's been a smart move, especially when industry experts project shares of health care providers will soar in the years ahead, owing to the Affordable Care Act, a.k.a. Obamacare.

CVS stock is up some 8% in 2015 and 22% over the past 12 months, crushing not only the S&P 500 (SPX) during both spans, but also the SPDR S&P Retail ETF (XRT) - Get Report , which is down about 5% in 2015. Even with CVS's outperformance, the health care retailer, which has a consensus buy rating from analysts, is showing no signs of slowing down.

Boosted by an aging baby-boomer population that's becoming eligible for Medicare health care benefits and low-cost prescription drugs, CVS is projected to grow operating earnings at an average annual rate of 16% in the next five years.

Not only would that growth rate be almost three times the earnings growth rate produced by the average S&P 500 company in the past couple of years, CVS's five-year projected earnings growth rate would also be one percentage point higher than larger rival Walgreens Boost Alliance (WBA) - Get Report . By contrast, earnings at Rite Aid (RAD) - Get Report , the third-largest drugstore chain in the U.S., are projected to decline. (Walgreens may buy Rite Aid.)

CVS stock -- at 24 times earnings, against an average price-to-earnings ratio of 21 for stocks in the S&P 500 index -- doesn't scream bargain today. But the fundamental health of the company, which has led to five straight earnings beats, make it worth the wager. It would seem analysts agree, based on the stock's average 12-month price target of $120. Combined with its 35-cent quarterly dividend that yields 1.35% annually, that's healthy value.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.