CVS Health Corporation (CVS - Free Report) has been gaining investors’ confidence on consistently positive results. Over the past six months, the company’s stock has underperformed its industry. The stock has gained 0.3%, in comparison with the 2.8% rise of the industry. However, the company has outperformed the S&P 500’s 8.2% decline.
This renowned pharmacy innovation company with integrated offerings across the entire spectrum of pharmacy care has a market cap of $66.81 billion. The company’s five-year projected growth rate is an attractive 11%.
With solid prospects, this Zacks Rank #2 (Buy) stock is a great pick for investors at the moment.
What Working in Favor of the Stock?
Impressive Synergies From Aetna Deal
A momentous healthcare consolidation has commenced with CVS Health's recently-completed acquisition of the U.S. health insurance giant Aetna for a colossal $70 billion. Economists have termed this as one valuable deal that could change the face of American health care. On 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.
Per the company, this merger has the potential to deliver a significant incremental value as it is likely to spur development of products and generate new-growth opportunities as a uniquely integrated retailer, pharmacy benefits manager and a far-sighted health planner.
PBM Business Gaining Traction
With regard to its 2019 PBM selling season, CVS Health has noted that it has completed more than 70% of its client renewals, roughly in line with the previous year. The retention rate is currently higher than the rates seen over the last few years.
However, the company noted that it sees fewer RFP opportunities in the market than the past few years. Despite this, current gross wins stand at an impressive level of $1.8 billion with net new business of approximately $200 million.
Retail on Growth Track
Over the last few quarters, the retail Long Term Care business registered positive revenue growth after several quarters of a drag. The year-over-year growth was 6.4% in the third quarter. The strong growth was primarily driven by strong comp script growth from continued adoption of Patient Care Programs, successful partnerships with PBMs and health plans across the industry and the company’s preferred position in a number of Medicare Part D networks in 2018. The company has seen significant uptick in both Optum and Cigna clients for many CVS Pharmacy and MinuteClinic programs.
Other Key Picks
Other top-ranked stocks in the broader medical space are Veeva Systems (VEEV - Free Report) , Integer Holdings Corporation (ITGR - Free Report) and Surmodics, Inc. (SRDX - Free Report) .
Veeva Systems’ long-term earnings growth rate is estimated at 19.5%. The stock flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Integer Holdings, with a Zacks Rank #1, has an earnings growth rate of 31.2% for the first quarter of 2019.
Surmodics’ long-term earnings growth rate is projected at 10%. The stock carries a Zacks Rank of 2 (Buy).
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