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CVS Health's Aetna Prospects Solid, Omnicare Sluggish

Zacks Equity Research

On Nov 8, we issued an updated research report on CVS Health CVS. Increasing demand for Pharmacy Benefit Management (PBM) and specialty pharmacy has been a major growth 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 gained 30.9% compared with its industry’s 20.9% growth.

The company posted better-than-expected third-quarter results demonstrating successful execution of its strategic priorities. This led to all three segments’ in-line or better-than-expected performances. Going by these 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.

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 solid progress in terms of the 2020 and 2021 selling seasons.

With regard to CVS Health’s 2020 PBM selling season, its next-year selling season is nearing completion with gross new business increasing 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 according to 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 strong momentum, particularly in government business.

On the flip side, per CVS Health, 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, NuVasive, Inc NUVA and GW Pharmaceuticals PLC GWPH.

Haemonetics, currently sporting a Zacks Rank #1 (Strong Buy), has a projected long-term earnings growth rate at 13.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.

NuVasive, with a Zacks Rank #2 (Buy), has projected long-term earnings growth rate of 10.9%.

GW Pharmaceuticals estimates fourth-quarter earnings growth rate to be 67.9%. It currently carries a Zacks Rank #2.

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NuVasive, Inc. (NUVA) : Free Stock Analysis Report
 
Haemonetics Corporation (HAE) : Free Stock Analysis Report
 
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CVS Health Corporation (CVS) : Free Stock Analysis Report
 
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