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CVS Health (CVS) Gains From Digital Adoption Amid Competition
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CVS Health’s (CVS - Free Report) restructuring plan, intended to streamline and simplify the organization, looks impressive. However, reimbursement pressure remains a concern. The stock currently carries a Zacks Rank #3 (Hold).
CVS Health is committed to increasing investments in fast-growing spaces like enterprise data platforms, cloud capabilities and digital products to offer innovative solutions through mobile and web channels. The company is investing in emerging technology capabilities such as voice, artificial intelligence and robotics to automate, reduce cost and improve the experience for its constituents.
The company has been removing barriers to digital adoption and making it easier for customers to access the services they seek, such as pharmacy refills and advanced scheduling for immunizations online. The company’s solid digital engagement and enhanced capabilities will strengthen its ability to drive seasonal flu and RFD immunization awareness and connect patients to the CVS locations for these important health services.
The company focuses on innovating and delivering experiences that matter most to customers, which is driving digital growth. In the Q4 update, management noted that it has more than 55 million CVS Health customers engaged in its digital offerings. The company sees tremendous opportunities to expand engagement with customers through its multi-payer capabilities and vast consumer reach.
In 2023, CVS Health developed an enterprise-wide restructuring plan intended to streamline and simplify the organization, improve efficiency and reduce costs. In conjunction with developing this plan and the recently completed acquisitions of Signify Health and Oak Street Health, the company conducted a strategic review of its various transformation initiatives and determined that it would terminate certain initiatives.
In lieu of this, CVS Health announced a restructuring charge of nearly $500 million associated with the elimination of nearly 5,000 non-customer-facing positions and the impairment of non-core assets. These efforts are expected to generate over $600 million of savings annually beginning in 2024.
On the flip side, CVS Health’s retail pharmacy, specialty pharmacy and LTC pharmacy operations have been affected by reimbursement pressure caused by competition, including client demand for lower prices, generic drug pricing, earlier-than-expected generic drug introductions and network reimbursement pressure. If a company is unable to increase its prices to reflect or otherwise mitigate the impact of increasing costs, its profitability will be affected. If the company is unable to limit its price increases, it may lose customers to competitors with more favorable pricing, adversely impacting revenues and operating results.
In the fourth quarter, the reimbursement pressure within the pharmacy business continued despite experiencing certain stabilization. The company is making continued efforts to combat this reimbursement pressure by increasing volume and reducing costs.
Further, despite significant new client wins in the course of a strong selling season, intense competition and tough industry conditions act as major impediments for CVS Health. 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, in particular, have made substantial inroads in gaining market share.
Key Picks
Some better-ranked stocks to consider in the broader medical space are Universal Health Services (UHS - Free Report) , Integer Holdings Corporation (ITGR - Free Report) and Stryker (SYK - Free Report) .
Universal Health Services, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 4.4% for 2024. UHS’ earnings surpassed estimates in all the trailing four quarters, delivering an average surprise of 5.47%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
UHS’ shares have risen 6.5% in the past year compared with the industry’s 11.8% rise.
Integer Holdings, presently carrying a Zacks Rank of 2, has an estimated long-term growth rate of 15.8%. ITGR’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 11.9%.
Integer Holdings’ shares have rallied 54.8% in the past year against the industry’s 3.5% decline.
Estimates for Stryker’s 2024 earnings per share have increased from $11.53 to $11.84 in the past 30 days. Shares of the company have moved 28.8% north in the past year compared with the industry’s rise of 4%. SYK carries a Zacks Rank #2 currently.
SYK’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 5.1%. In the last reported quarter, it delivered an earnings surprise of 5.8%.
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CVS Health (CVS) Gains From Digital Adoption Amid Competition
CVS Health’s (CVS - Free Report) restructuring plan, intended to streamline and simplify the organization, looks impressive. However, reimbursement pressure remains a concern. The stock currently carries a Zacks Rank #3 (Hold).
CVS Health is committed to increasing investments in fast-growing spaces like enterprise data platforms, cloud capabilities and digital products to offer innovative solutions through mobile and web channels. The company is investing in emerging technology capabilities such as voice, artificial intelligence and robotics to automate, reduce cost and improve the experience for its constituents.
The company has been removing barriers to digital adoption and making it easier for customers to access the services they seek, such as pharmacy refills and advanced scheduling for immunizations online. The company’s solid digital engagement and enhanced capabilities will strengthen its ability to drive seasonal flu and RFD immunization awareness and connect patients to the CVS locations for these important health services.
The company focuses on innovating and delivering experiences that matter most to customers, which is driving digital growth. In the Q4 update, management noted that it has more than 55 million CVS Health customers engaged in its digital offerings. The company sees tremendous opportunities to expand engagement with customers through its multi-payer capabilities and vast consumer reach.
CVS Health Corporation Price
CVS Health Corporation price | CVS Health Corporation Quote
In 2023, CVS Health developed an enterprise-wide restructuring plan intended to streamline and simplify the organization, improve efficiency and reduce costs. In conjunction with developing this plan and the recently completed acquisitions of Signify Health and Oak Street Health, the company conducted a strategic review of its various transformation initiatives and determined that it would terminate certain initiatives.
In lieu of this, CVS Health announced a restructuring charge of nearly $500 million associated with the elimination of nearly 5,000 non-customer-facing positions and the impairment of non-core assets. These efforts are expected to generate over $600 million of savings annually beginning in 2024.
On the flip side, CVS Health’s retail pharmacy, specialty pharmacy and LTC pharmacy operations have been affected by reimbursement pressure caused by competition, including client demand for lower prices, generic drug pricing, earlier-than-expected generic drug introductions and network reimbursement pressure. If a company is unable to increase its prices to reflect or otherwise mitigate the impact of increasing costs, its profitability will be affected. If the company is unable to limit its price increases, it may lose customers to competitors with more favorable pricing, adversely impacting revenues and operating results.
In the fourth quarter, the reimbursement pressure within the pharmacy business continued despite experiencing certain stabilization. The company is making continued efforts to combat this reimbursement pressure by increasing volume and reducing costs.
Further, despite significant new client wins in the course of a strong selling season, intense competition and tough industry conditions act as major impediments for CVS Health. 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, in particular, have made substantial inroads in gaining market share.
Key Picks
Some better-ranked stocks to consider in the broader medical space are Universal Health Services (UHS - Free Report) , Integer Holdings Corporation (ITGR - Free Report) and Stryker (SYK - Free Report) .
Universal Health Services, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 4.4% for 2024. UHS’ earnings surpassed estimates in all the trailing four quarters, delivering an average surprise of 5.47%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
UHS’ shares have risen 6.5% in the past year compared with the industry’s 11.8% rise.
Integer Holdings, presently carrying a Zacks Rank of 2, has an estimated long-term growth rate of 15.8%. ITGR’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 11.9%.
Integer Holdings’ shares have rallied 54.8% in the past year against the industry’s 3.5% decline.
Estimates for Stryker’s 2024 earnings per share have increased from $11.53 to $11.84 in the past 30 days. Shares of the company have moved 28.8% north in the past year compared with the industry’s rise of 4%. SYK carries a Zacks Rank #2 currently.
SYK’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 5.1%. In the last reported quarter, it delivered an earnings surprise of 5.8%.