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Here's Why You Should Retain CVS Health (CVS) Stock for Now
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CVS Health Corporation (CVS - Free Report) is well poised for growth, backed by the continued growth across the entire range of insured and self-insured medical, pharmacy, dental and behavioral health products and services. The acquisition of Oak Street Health is expected to advance CVS Health’s care delivery strategy for consumers. However, poor macroeconomic conditions and stiff competition are headwinds.
In the past year, the Zacks Rank #3 (Hold) stock has lost 23% compared with the industry’s 23.3% fall and the S&P 500’s 15.8% rise.
The pharmacy innovation company, with integrated offerings across the entire spectrum of pharmacy care, has a market capitalization of $89.56 billion. The company projects a 6.4% growth for the next five years. It surpassed estimates in the trailing four quarters, the average surprise being 6.5%.
Riding on current business growth and bullish near-term prospects, the company is worth retaining for now.
Key Growth Catalysts
Health Care Benefit Shows Potential: Following the colossal acquisition of health insurance giant Aetna for a colossal sum of $70 billion, CVS Health introduced its Health Care Benefits business arm. This segment has been exhibiting continued strong momentum in the past few quarters. In the first quarter, the segment’s revenues increased more than 12%. Overall medical costs were well controlled and in line with expectations. Membership in the first quarter increased by 1 million members versus the prior year’s levels. The upside was primarily driven by the significant increase in the individual exchange business.
Health Services Business Gaining Traction: In the first quarter, CVS Health achieved robust revenue growth within Health Services (previously known as the Pharmacy segment). Revenues were up 12.6% in the reported quarter, driven by pharmacy claims growth, specialty pharmacy and brand inflation. The upside was partially offset by continued client price improvements. Total pharmacy claims processed rose 3.7% on a 30-day equivalent basis, attributable to net new business in 2023, increased utilization and the impact of an elevated cough, cold and flu season.
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In May 2023, CVS Health completed its acquisition of Oak Street Health. The buyout will broaden CVS' value-based primary care platform and improve patients’ long-term health through better outcomes and lower costs — particularly for those in underserved communities.
Pharmacy & Consumer Wellness on a Growth Track: During the first quarter, the company noted that its considerable expansion in retail pharmacy led to significant market share increases over time. This demonstrates the benefit offered to pharmacy patients and the investments made to enhance their experiences. Front-store sales increased by 5% or nearly 8% on a same-store basis, thanks to growth in a number of categories, including consumer health items, personal care and cosmetics.
Downsides
Competitive Landscape: In spite of significant new client wins in the course of a strong selling season, intense competition and tough industry conditions are impediments. Major competitors such as Walgreens, Target and Wal-Mart are expanding their pharmacy businesses. Competition is especially tough in the pharmacy segment, as other retail businesses continue to add pharmacy departments and low-cost pharmacy options become available. Discount retailers have made substantial inroads in gaining market share.
Poor Macroeconomic Condition: Although prescriptions and related health care service providers like CVS stay out of general macro-economic turmoil, the recent debt crisis and sluggish economic conditions in the United States could impact consumer purchasing power. This may also influence preferences and spending patterns and result in low prescription utilization.
Estimate Trends
In the past 90 days, the Zacks Consensus Estimate for its fiscal 2023 earnings has been down 2.7% of $8.61.
The Zacks Consensus Estimate for fiscal 2023 revenues is pegged at $348.4 billion, suggesting an 8% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Hologic, Inc. (HOLX - Free Report) , Merit Medical Systems, Inc. (MMSI - Free Report) and Boston Scientific Corporation (BSX - Free Report) .
Hologic, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 5.1% for fiscal 2024. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average being 27.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Hologic has gained 16.2% compared with the industry’s 11% rise in the past year.
Merit Medical, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 20.2%.
Merit Medical has gained 53.1% compared with the industry’s 20.1% rise in the past year.
Boston Scientific, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11.5%. BSX’s earnings surpassed estimates in two of the trailing four quarters and missed in the other two, the average surprise being 1.9%.
Boston Scientific has gained 42.7% against the industry’s 21.2% decline in the past year.
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Here's Why You Should Retain CVS Health (CVS) Stock for Now
CVS Health Corporation (CVS - Free Report) is well poised for growth, backed by the continued growth across the entire range of insured and self-insured medical, pharmacy, dental and behavioral health products and services. The acquisition of Oak Street Health is expected to advance CVS Health’s care delivery strategy for consumers. However, poor macroeconomic conditions and stiff competition are headwinds.
In the past year, the Zacks Rank #3 (Hold) stock has lost 23% compared with the industry’s 23.3% fall and the S&P 500’s 15.8% rise.
The pharmacy innovation company, with integrated offerings across the entire spectrum of pharmacy care, has a market capitalization of $89.56 billion. The company projects a 6.4% growth for the next five years. It surpassed estimates in the trailing four quarters, the average surprise being 6.5%.
Riding on current business growth and bullish near-term prospects, the company is worth retaining for now.
Key Growth Catalysts
Health Care Benefit Shows Potential: Following the colossal acquisition of health insurance giant Aetna for a colossal sum of $70 billion, CVS Health introduced its Health Care Benefits business arm. This segment has been exhibiting continued strong momentum in the past few quarters. In the first quarter, the segment’s revenues increased more than 12%. Overall medical costs were well controlled and in line with expectations. Membership in the first quarter increased by 1 million members versus the prior year’s levels. The upside was primarily driven by the significant increase in the individual exchange business.
Health Services Business Gaining Traction: In the first quarter, CVS Health achieved robust revenue growth within Health Services (previously known as the Pharmacy segment). Revenues were up 12.6% in the reported quarter, driven by pharmacy claims growth, specialty pharmacy and brand inflation. The upside was partially offset by continued client price improvements. Total pharmacy claims processed rose 3.7% on a 30-day equivalent basis, attributable to net new business in 2023, increased utilization and the impact of an elevated cough, cold and flu season.
In May 2023, CVS Health completed its acquisition of Oak Street Health. The buyout will broaden CVS' value-based primary care platform and improve patients’ long-term health through better outcomes and lower costs — particularly for those in underserved communities.
Pharmacy & Consumer Wellness on a Growth Track: During the first quarter, the company noted that its considerable expansion in retail pharmacy led to significant market share increases over time. This demonstrates the benefit offered to pharmacy patients and the investments made to enhance their experiences. Front-store sales increased by 5% or nearly 8% on a same-store basis, thanks to growth in a number of categories, including consumer health items, personal care and cosmetics.
Downsides
Competitive Landscape: In spite of significant new client wins in the course of a strong selling season, intense competition and tough industry conditions are impediments. Major competitors such as Walgreens, Target and Wal-Mart are expanding their pharmacy businesses. Competition is especially tough in the pharmacy segment, as other retail businesses continue to add pharmacy departments and low-cost pharmacy options become available. Discount retailers have made substantial inroads in gaining market share.
Poor Macroeconomic Condition: Although prescriptions and related health care service providers like CVS stay out of general macro-economic turmoil, the recent debt crisis and sluggish economic conditions in the United States could impact consumer purchasing power. This may also influence preferences and spending patterns and result in low prescription utilization.
Estimate Trends
In the past 90 days, the Zacks Consensus Estimate for its fiscal 2023 earnings has been down 2.7% of $8.61.
The Zacks Consensus Estimate for fiscal 2023 revenues is pegged at $348.4 billion, suggesting an 8% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Hologic, Inc. (HOLX - Free Report) , Merit Medical Systems, Inc. (MMSI - Free Report) and Boston Scientific Corporation (BSX - Free Report) .
Hologic, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 5.1% for fiscal 2024. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average being 27.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Hologic has gained 16.2% compared with the industry’s 11% rise in the past year.
Merit Medical, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 20.2%.
Merit Medical has gained 53.1% compared with the industry’s 20.1% rise in the past year.
Boston Scientific, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11.5%. BSX’s earnings surpassed estimates in two of the trailing four quarters and missed in the other two, the average surprise being 1.9%.
Boston Scientific has gained 42.7% against the industry’s 21.2% decline in the past year.