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CVS Health Banks on Health Care Benefit Prospects Amid Woes


On Aug 13, we issued an updated research report on CVS Health CVS. Increasing demand for Pharmacy Benefit Management (PBM) and specialty pharmacy has been a major driver for the stock. The company currently carries a Zacks Rank #3 (Hold).

Over the past three months, shares of CVS Health have outperformed its industry. The stock has rallied 10.9% compared with 4.2% growth of the industry.

The company delivered promising second-quarter results, demonstrating success in its execution of strategic priorities. Given this agenda, in June, the company announced that it has plans to convert 1500 locations into health hubs by 2021end. In this regard, the company has already started to witness increased customer traffic and incremental sales in pharmacy front store and MinuteClinics at the initial hubs.

CVS Health Corporation Price

CVS Health Corporation Price

CVS Health Corporation price | CVS Health Corporation Quote

In terms of segmental performances, year-over-year growth in the top line was driven by a strong Pharmacy Services segment, benefiting from the upside in specialty services. We are also pleased with CVS Health’s remarkable progress in the 2020 selling season.

The company’s recently introduced Health Care Benefits segment following the Aetna acquisition is showing a robust momentum, particularly in government business. Notably, CVS Health expects to earn $750 million from near-term synergies of the Aetna integration with low to mid-single digit accretion in the second year post the transaction’s closure.

On the flip side, CVS Health expects 2019 to be transitional as it consolidates Aetna and anticipates its following challenges to leave a certain adverse impact on the operating income of its Pharmacy Services and Retail/LTC segments this year compared with 2018.

Stocks to Consider

A few better-ranked stocks in the broader medical space are Medtronic MDT, Baxter BAX and NuVasive Corporation NUVA, each presently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Medtronic’s long-term earnings growth rate is expected at 7.13%.

Baxter’s long-term earnings growth rate is projected at 12.8%.

NuVasive’s long-term earnings growth rate is expected to be 12.75%.

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