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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 its consistently strong sales momentum across all three operating segments. The acquisition of Oak Street Health advances its care delivery strategy for consumers, which is likely to boost future growth. However, stiff competition and poor macroeconomic conditions are a concern.
In the past year, this Zacks Rank #3 (Hold) stock has declined 10.3% compared with the industry’s 17.6% fall and the S&P 500’s 22.1% rise.
The pharmacy innovation company, with integrated offerings across the entire spectrum of pharmacy care, has a market capitalization of $96.39 billion. The company has a long-term estimated earnings growth rate of 5.2%.
Let’s delve deeper.
Tailwinds
Rapid Digital Growth: 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 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 across CVS Health through its multi-payer capabilities and vast consumer reach.
Pharmacy & Consumer Wellness on a Growth Track: The company’s considerable expansion in the retail pharmacy has led to significant market share increases over time. This demonstrates the benefit the company offers to pharmacy patients and the investments made to enhance their experiences. In front store, CVS Health has grown its market share, increased household penetration and delivered historically high service levels. This positions the company well to manage through economic volatility.
In terms of the latest update, during the fourth quarter, same-store pharmacy sales were up nearly 15.5%, driven by drug mix, a 4.4% increase in same-store prescription volumes and brand inflation.
Image Source: Zacks Investment Research
The company is creating new value in healthcare with innovative models and offerings that create more transparency and choice for consumers and clients. In December 2023, CVS Health unveiled its new CVS CostVantage model in the pharmacy and consumer wellness business. This model proactively addresses the persistent reimbursement pressures in the retail pharmacy industry.
Health Care Benefit Shows Potential: Following the colossal acquisition of health insurance giant Aetna, CVS Health introduced its Health Care Benefits business arm. This segment manages drug cost trends and brings innovative clinical solutions to the market. Medical membership in the fourth quarter of 2023 grew to 25.7 million. This marked an increase of 1.3 million members compared with the prior year, reflecting growth across multiple product lines, including individual exchange, Medicare and commercial. Medicare Advantage is integral to the CVS Health Strategy. The company expects to add at least 800,000 new members in 2024.
Downsides
Competitive Landscape: Despite significant new client wins in the course of a strong selling season, intense competition and tough industry conditions act as significant impediments for CVS Health. Major competitors such as Walgreens, Target and Wal-Mart are expanding their pharmacy businesses.
Poor Macroeconomic Condition: Adverse economic conditions in the United States and abroad are adversely impacting CVS Health’s businesses, operating results and financial condition.
The challenging macroeconomic conditions are resulting in a significant escalation in the company’s costs and expenses. During the fourth quarter, the company’s total cost (including Benefit Costs) rose 11%.
Estimate Trends
In the past 90 days, the Zacks Consensus Estimate for its fiscal 2024 earnings has moved from $8.56 to $8.38 per share.
The Zacks Consensus Estimate for fiscal 2024 revenues is pegged at $369.3 billion, suggesting a 3.2% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks from the broader medical space are Stryker Corporation (SYK - Free Report) , Cencora, Inc. (COR - Free Report) and Cardinal Health (CAH - Free Report) .
Stryker, carrying a Zacks Rank #2 (Buy), reported a fourth-quarter 2023 adjusted EPS of $3.46, beating the Zacks Consensus Estimate by 5.8%. Revenues of $5.8 billion outpaced the consensus estimate by 3.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stryker has an estimated earnings growth rate of 11.5% for 2025 compared with the S&P 500’s 9.9%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 5.1%.
Cencora, carrying a Zacks Rank #2, reported a first-quarter fiscal 2024 adjusted EPS of $3.28, which beat the Zacks Consensus Estimate by 14.7%. Revenues of $72.3 billion outpaced the Zacks Consensus Estimate by 5.1%.
COR has an earnings yield of 5.75% compared with the industry’s 1.85%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 6.7%.
Cardinal Health reported second-quarter fiscal 2024 adjusted earnings of $1.82, which beat the Zacks Consensus Estimate by 16.7%. Revenues of $57.45 billion improved 11.6% on a year-over-year basis and also topped the Zacks Consensus Estimate by 1.1%.
CAH has a long-term estimated earnings growth rate of 15.3% compared with the industry’s 11.8% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%.
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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 its consistently strong sales momentum across all three operating segments. The acquisition of Oak Street Health advances its care delivery strategy for consumers, which is likely to boost future growth. However, stiff competition and poor macroeconomic conditions are a concern.
In the past year, this Zacks Rank #3 (Hold) stock has declined 10.3% compared with the industry’s 17.6% fall and the S&P 500’s 22.1% rise.
The pharmacy innovation company, with integrated offerings across the entire spectrum of pharmacy care, has a market capitalization of $96.39 billion. The company has a long-term estimated earnings growth rate of 5.2%.
Let’s delve deeper.
Tailwinds
Rapid Digital Growth: 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 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 across CVS Health through its multi-payer capabilities and vast consumer reach.
Pharmacy & Consumer Wellness on a Growth Track: The company’s considerable expansion in the retail pharmacy has led to significant market share increases over time. This demonstrates the benefit the company offers to pharmacy patients and the investments made to enhance their experiences. In front store, CVS Health has grown its market share, increased household penetration and delivered historically high service levels. This positions the company well to manage through economic volatility.
In terms of the latest update, during the fourth quarter, same-store pharmacy sales were up nearly 15.5%, driven by drug mix, a 4.4% increase in same-store prescription volumes and brand inflation.
Image Source: Zacks Investment Research
The company is creating new value in healthcare with innovative models and offerings that create more transparency and choice for consumers and clients. In December 2023, CVS Health unveiled its new CVS CostVantage model in the pharmacy and consumer wellness business. This model proactively addresses the persistent reimbursement pressures in the retail pharmacy industry.
Health Care Benefit Shows Potential: Following the colossal acquisition of health insurance giant Aetna, CVS Health introduced its Health Care Benefits business arm. This segment manages drug cost trends and brings innovative clinical solutions to the market. Medical membership in the fourth quarter of 2023 grew to 25.7 million. This marked an increase of 1.3 million members compared with the prior year, reflecting growth across multiple product lines, including individual exchange, Medicare and commercial. Medicare Advantage is integral to the CVS Health Strategy. The company expects to add at least 800,000 new members in 2024.
Downsides
Competitive Landscape: Despite significant new client wins in the course of a strong selling season, intense competition and tough industry conditions act as significant impediments for CVS Health. Major competitors such as Walgreens, Target and Wal-Mart are expanding their pharmacy businesses.
Poor Macroeconomic Condition: Adverse economic conditions in the United States and abroad are adversely impacting CVS Health’s businesses, operating results and financial condition.
The challenging macroeconomic conditions are resulting in a significant escalation in the company’s costs and expenses. During the fourth quarter, the company’s total cost (including Benefit Costs) rose 11%.
Estimate Trends
In the past 90 days, the Zacks Consensus Estimate for its fiscal 2024 earnings has moved from $8.56 to $8.38 per share.
The Zacks Consensus Estimate for fiscal 2024 revenues is pegged at $369.3 billion, suggesting a 3.2% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks from the broader medical space are Stryker Corporation (SYK - Free Report) , Cencora, Inc. (COR - Free Report) and Cardinal Health (CAH - Free Report) .
Stryker, carrying a Zacks Rank #2 (Buy), reported a fourth-quarter 2023 adjusted EPS of $3.46, beating the Zacks Consensus Estimate by 5.8%. Revenues of $5.8 billion outpaced the consensus estimate by 3.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stryker has an estimated earnings growth rate of 11.5% for 2025 compared with the S&P 500’s 9.9%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 5.1%.
Cencora, carrying a Zacks Rank #2, reported a first-quarter fiscal 2024 adjusted EPS of $3.28, which beat the Zacks Consensus Estimate by 14.7%. Revenues of $72.3 billion outpaced the Zacks Consensus Estimate by 5.1%.
COR has an earnings yield of 5.75% compared with the industry’s 1.85%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 6.7%.
Cardinal Health reported second-quarter fiscal 2024 adjusted earnings of $1.82, which beat the Zacks Consensus Estimate by 16.7%. Revenues of $57.45 billion improved 11.6% on a year-over-year basis and also topped the Zacks Consensus Estimate by 1.1%.
CAH has a long-term estimated earnings growth rate of 15.3% compared with the industry’s 11.8% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%.