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CVS Health Rides on Aetna Prospects, Strong Selling Season

Zacks Equity Research

On Dec 10, we issued an updated research report on CVS Health CVS. Increasing demand for Pharmacy Benefit Management (PBM) and specialty pharmacy is a major steady driver. 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 gained 14.4% compared with its industry’s 10.6% growth.

The company posted better-than-expected third-quarter 2019 results, demonstrating successful execution of its strategic priorities. This led to all three segments’ in-line or solid performances. Going by its strategic priorities, CVS Health is currently on track to make approximately 50 hubs operational by this year-end along with its original plan to have 1,500 hubs by the end of 2021. The company already started witnessing increased customer traffic and incremental sales in pharmacy front store and MinuteClinics.

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 sturdy progress in the 2020 and 2021 selling seasons.

The company’s 2020 PBM selling season is nearing completion with gross new business growing by $1.1 billion and net new business improving by approximately $1 billion since the sequential quarter’s update.

The 2021 selling season is now underway and per the company, it is well-positioned to serve both new and existing clients.

The company’s recently introduced Health Care Benefits segment following the Aetna acquisition is showing a robust momentum, particularly in government business.

On the flip side, Omnicare business performance is likely to be soft through 2019. In the third quarter, persistent reimbursement pressure and the impact of recent generic introductions had a bearing on the company’s retail LTC business.

Stocks to Consider

Some better-ranked stocks from the broader medical space are Haemonetics Corporation HAE, National Vision Holdings, Inc EYE and ResMed Inc RMD.

Haemonetics currently has a Zacks Rank #2 (Buy) and a projected long-term earnings growth rate of 13.5%.

National Vision’s long-term earnings growth rate is estimated at 17.8%. The company currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ResMed’s long-term earnings growth rate is anticipated at 12.9%. It currently flaunts a Zacks Rank #1.

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ResMed Inc. (RMD) : Free Stock Analysis Report
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CVS Health Corporation (CVS) : Free Stock Analysis Report
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