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On Mar 19, we issued an updated research report on CVS Health (CVS - Free Report) . While increasing demand for PBM (Pharmacy Benefit Management) and specialty pharmacy was a major growth driver for the stock, its dull retail performance over the last few quarters seems to have disappointed investors. The company carries a Zacks Rank #3 (Hold).
Shares of the company have outperformed the industry in the past year. The stock has lost 19% compared with the 20.1% decrease of the broader industry.
Notably, CVS Health exited the fourth quarter 2017 on a solid note with both earnings and revenues remaining ahead of the Zacks Consensus Estimate. A year-over-year rise in the top line was owing to a strong Pharmacy Services segment, having benefited from the upside in the Specialty Pharmacy.
The company’s sturdy 2018 PBM selling season is another growth-booster. On another positive note, the company is already making a decent progress with its 2019 selling season. Good news is that it has been banking on gross wins of approximately $6.2 billion and net new business of $2.4 billion with a client retention rate of about 96.5%.
Meanwhile, we are looking forward to the company’s commencement of the momentous $69-billion healthcare consolidation with the U.S. health insurance giant, Aetna. On successful completion of the deal, CVS Health expects to earn $750 million from near-term synergies with low to mid-single digit accretion in the second year post the transaction’s closure.
Moreover, Omnicare and Target Pharmacy buyouts are gradually driving enterprise value at CVS Health. Further, management expects drug price inflation, product launches, higher utilization and new PBM clients to fuel growth. Additionally, we expect the Pharmacy Services segment to be a stable growth platform.
On the flip side, the company’s highly competitive retail pharmacy business is a big concern as it faces some stiff competition in the pharmacy segment. This is because availability of low-cost pharmacy options and other retail businesses continue to add pharmacy departments in the portfolio. Particularly, discount retailers have made substantial inroads in gaining a major market share. This apart, CVS Health has delivered some sluggish numbers within the retail Long Term Care business in the recent past. Per the company, this decision to restrict itself from participating in the TRICARE network and many fully-insured prime networks was due to the negative impact on Pharmacy sales and script comps.
Key Picks
A few better-ranked stocks in the broader medical sector are Bio-Rad Laboratories (BIO - Free Report) , athenahealth, Inc. and PerkinElmer .
athenahealth is a Zacks #1 Ranked player. The company has a long-term expected earnings growth rate of 21.5%.
PerkinElmer has a long-term expected earnings growth rate of 12.3%. The stock carries a Zacks Rank #2 (Buy).
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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CVS Health's Pharmacy Services Remain Solid Amid Retail Drag
On Mar 19, we issued an updated research report on CVS Health (CVS - Free Report) . While increasing demand for PBM (Pharmacy Benefit Management) and specialty pharmacy was a major growth driver for the stock, its dull retail performance over the last few quarters seems to have disappointed investors. The company carries a Zacks Rank #3 (Hold).
Shares of the company have outperformed the industry in the past year. The stock has lost 19% compared with the 20.1% decrease of the broader industry.
Notably, CVS Health exited the fourth quarter 2017 on a solid note with both earnings and revenues remaining ahead of the Zacks Consensus Estimate. A year-over-year rise in the top line was owing to a strong Pharmacy Services segment, having benefited from the upside in the Specialty Pharmacy.
The company’s sturdy 2018 PBM selling season is another growth-booster. On another positive note, the company is already making a decent progress with its 2019 selling season. Good news is that it has been banking on gross wins of approximately $6.2 billion and net new business of $2.4 billion with a client retention rate of about 96.5%.
Meanwhile, we are looking forward to the company’s commencement of the momentous $69-billion healthcare consolidation with the U.S. health insurance giant, Aetna. On successful completion of the deal, CVS Health expects to earn $750 million from near-term synergies with low to mid-single digit accretion in the second year post the transaction’s closure.
Moreover, Omnicare and Target Pharmacy buyouts are gradually driving enterprise value at CVS Health. Further, management expects drug price inflation, product launches, higher utilization and new PBM clients to fuel growth. Additionally, we expect the Pharmacy Services segment to be a stable growth platform.
On the flip side, the company’s highly competitive retail pharmacy business is a big concern as it faces some stiff competition in the pharmacy segment. This is because availability of low-cost pharmacy options and other retail businesses continue to add pharmacy departments in the portfolio. Particularly, discount retailers have made substantial inroads in gaining a major market share. This apart, CVS Health has delivered some sluggish numbers within the retail Long Term Care business in the recent past. Per the company, this decision to restrict itself from participating in the TRICARE network and many fully-insured prime networks was due to the negative impact on Pharmacy sales and script comps.
Key Picks
A few better-ranked stocks in the broader medical sector are Bio-Rad Laboratories (BIO - Free Report) , athenahealth, Inc. and PerkinElmer .
Bio-Rad Laboratories sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. The company has a long-term expected earnings growth rate of 20%.
athenahealth is a Zacks #1 Ranked player. The company has a long-term expected earnings growth rate of 21.5%.
PerkinElmer has a long-term expected earnings growth rate of 12.3%. The stock carries a Zacks Rank #2 (Buy).
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>