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CVS Health (CVS) Down on Prevailing Risks, Tepid Guidance
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On Dec 19, 2016, we issued an updated research report on Rhode Island-based pharmacy retail giant CVS Health Corp. (CVS - Free Report) , which provides integrated offerings across the entire spectrum of pharmacy care.
CVS Health traded neck on neck with the Zacks categorized Retail - Pharmacies and Drug Stores industry over the past six months until it delivered mixed third-quarter 2016 results. The stock lost 14.66% over this period, wider than the 7.22% loss of the broader industry. Apart from a disappointing top-line performance, narrowed full-year guidance indicates slim chances of recovery any time soon. An extremely bearish estimate revision trend also indicates a gloomy scenario ahead. Although, very recently the company came up with an updated guidance for 2016 and 2017, majority of the expected numbers remained unchanged, making us cautious about the stock.
Nonetheless, year-over-year growth remained impressive in the third quarter, with the Pharmacy Services segment reaping benefits from growth in the Specialty Pharmacy business while the Retail Pharmacy segment gained from increased same-store sales. CVS Health also expects to benefit from the recently acquired Omnicare and Target in both near and long term. Additionally, it anticipates gaining market share in the specialty pharmacy suite of services with differentiated specialty offerings, providing a high level of clinical support to patients.
Meanwhile, according to recent data, three million people in the U.S. are currently in need of specialty treatment and the potential cost for this tends to be very high. With management emphasizing that CVS Health's specialty business remains a top priority for customers, we believe it is well positioned to tap this opportunity based on its broad, differentiated offerings, including the likes of Specialty Connect.
However, given the highly competitive retail pharmacy business, shareholders of CVS Health anticipate severe threat from the $17.2 billion mega merger between Walgreens and Rite Aid, once the deal closes. Also, the sluggish economic conditions in the U.S. might hamper the company's profit margin.
The stock currently holds a Zacks Rank #4 (Sell).
Key Picks
Some of the better-ranked medical stocks include NxStage Medical Inc. , Baxter International Inc. (BAX - Free Report) and Bovie Medical Corporation . NxStage Medical and Baxter International sport a Zacks Rank #1 (Strong Buy) while Bovie Medical carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NxStage Medical surged 22.6% over the last one year compared with the S&P 500’s 11.9% growth, over the same period. The company has a four-quarter average positive earnings surprise of 46.3%.
Baxter International rallied 21.7% over the last one year, much higher than the S&P 500. It has a trailing four-quarter average positive earnings surprise of 27%.
Bovie Medical recorded a 114.7% gain in the past one year, way better than the S&P 500. The company has a trailing four-quarter positive average earnings surprise of 28.7%.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>
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CVS Health (CVS) Down on Prevailing Risks, Tepid Guidance
On Dec 19, 2016, we issued an updated research report on Rhode Island-based pharmacy retail giant CVS Health Corp. (CVS - Free Report) , which provides integrated offerings across the entire spectrum of pharmacy care.
CVS Health traded neck on neck with the Zacks categorized Retail - Pharmacies and Drug Stores industry over the past six months until it delivered mixed third-quarter 2016 results. The stock lost 14.66% over this period, wider than the 7.22% loss of the broader industry. Apart from a disappointing top-line performance, narrowed full-year guidance indicates slim chances of recovery any time soon. An extremely bearish estimate revision trend also indicates a gloomy scenario ahead. Although, very recently the company came up with an updated guidance for 2016 and 2017, majority of the expected numbers remained unchanged, making us cautious about the stock.
Nonetheless, year-over-year growth remained impressive in the third quarter, with the Pharmacy Services segment reaping benefits from growth in the Specialty Pharmacy business while the Retail Pharmacy segment gained from increased same-store sales. CVS Health also expects to benefit from the recently acquired Omnicare and Target in both near and long term. Additionally, it anticipates gaining market share in the specialty pharmacy suite of services with differentiated specialty offerings, providing a high level of clinical support to patients.
Meanwhile, according to recent data, three million people in the U.S. are currently in need of specialty treatment and the potential cost for this tends to be very high. With management emphasizing that CVS Health's specialty business remains a top priority for customers, we believe it is well positioned to tap this opportunity based on its broad, differentiated offerings, including the likes of Specialty Connect.
However, given the highly competitive retail pharmacy business, shareholders of CVS Health anticipate severe threat from the $17.2 billion mega merger between Walgreens and Rite Aid, once the deal closes. Also, the sluggish economic conditions in the U.S. might hamper the company's profit margin.
The stock currently holds a Zacks Rank #4 (Sell).
Key Picks
Some of the better-ranked medical stocks include NxStage Medical Inc. , Baxter International Inc. (BAX - Free Report) and Bovie Medical Corporation . NxStage Medical and Baxter International sport a Zacks Rank #1 (Strong Buy) while Bovie Medical carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NxStage Medical surged 22.6% over the last one year compared with the S&P 500’s 11.9% growth, over the same period. The company has a four-quarter average positive earnings surprise of 46.3%.
Baxter International rallied 21.7% over the last one year, much higher than the S&P 500. It has a trailing four-quarter average positive earnings surprise of 27%.
Bovie Medical recorded a 114.7% gain in the past one year, way better than the S&P 500. The company has a trailing four-quarter positive average earnings surprise of 28.7%.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>