CVS and Walgreens stock increases annually around flu time

‘Tis the season.
‘Tis the season.
Image: Reuters/Andrew Kelly
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There’s no such thing as a good flu season, and it’s no secret that this one has been a particularly nasty in the US (despite what some of the president’s campaign advisors may think). Although health officials plan for outbreaks of influenza every fall and winter, in January last year there were 368 deaths related to the flu; this year, there were 852.

The same ebb and flow of the flu season can also be seen in pharmacy stocks.

This week, Bespoke Investment Group pointed out that over the past decade the share price of pharmacy chain CVS has risen during the same two-week period in February. There’s no such thing as a regular peak for flu season (it’s a truly unpredictable virus), but according to the US Centers for Disease Control, cases of the virus usually peak between December and February. Could it be that the flu is responsible for a spike in CVS’s stock price? Quartz decided to double-check the analysis.

At first glance, yes: CVS stock tends to outperform the market in the winter months in the northern hemisphere. From 2008 to 2018, the average monthly change in CVS’s stock price outpaced the S&P 500 from December through April, and underperformed from May to June.

We also ran the numbers for Walgreens, to see if it followed the same pattern. And it does—if you overlook a big spike in July.

Superficially, it looks like the annual flu season is tied to pharmacy activity. Presumably, more people getting sick leads to more people going to their local pharmacy to buy painkillers, decongestants, hot packs, and lozenges. More revenue for the chain could then attract more buyers for its stock.

But that’s not the whole story. Share prices go up and down for a wide variety of reasons, not all of them to do with a company’s financial results. And if pharmacies predictably report a boost in flu-season sales, that should be priced into share prices—investors in retailers aren’t surprised when sales spike around Christmas, after all.

To make sure we weren’t overlooking other connections between share prices and the flu, we compared annual stock returns to the severity of the corresponding year’s flu season (using an index created by researchers at the CDC). When we crunched the numbers, we couldn’t find a connection.

Realistically, flu activity probably has minimal effects on pharmacy stock fluctuations—although the routine winter outperformance is an interesting coincidence.