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2 weeks ago
Bear of the Day: CVS Health (CVS)
By: Zacks Investment Research | June 17, 2024
Zacks Rank #5 (Strong Sell) stock CVS Health (CVS) is the largest retail pharmacy chain in the United States. The company operates in four main segments: health care benefits, health services, pharmacy and consumer wellness, and corporate/other. Though CVS is a household name, has been in business for more than 60 years, and is highly profitable, the company’s stock is facing several bearish headwinds that are company-specific and industry-wide.
Retail Theft Plagues Pharmacy Industry
Since 2018, the amount of lost retail revenue due to theft has grown each year consecutively and soared overall. For example, in 2018, retailers lost about $50 billion to theft. By 2024, projections call for retail theft losses to balloon to more than $130 billion and a whopping $143 billion by 2025. According to Capital One Financial (COF), “Retailers lost $112.1 billion in gross revenue and $84.9 billion in fraudulent sales returns in 2022.” Meanwhile, “The average shoplifting incident cost retailers $461.86 in 2020.”
Indeed, there is plenty of time and room for the political blame game. However, as investors, we must focus on what is going on and how it will impact the market while leaving the politics to the dinner table. Brazen organized retail incidents are becoming commonplace. What’s worse, shoplifters are caught roughly 2% of the time and arrested 1% of the time. The troubling trend is leading to higher expenses and worse profit margins.
Image Source: Zacks Investment Research
As a result, CVS and its main drugstore competitor, Walgreens Boots Alliance (WBA), have closed numerous stores in hard-hit areas of the country, such as California and New York. However, customers are turning away from brick-and-mortar drugstores in several open locations. In heavy crime zones like Manhattan, customers must flag down associates to gain access to the growing number of items locked behind protective glass. Instead of accepting the frustrating situation, many retail customers are taking their business to e-commerce retailers such as Amazon (AMZN) or PDD’s (PDD) Temu.
Poor Medicare Advantage Rating Squeezes CVS Profits
Medicare Advantage ratings, or Medicare Star Ratings, measure the performance of Medicare Advantage Part D plans. In 2023, CVS suffered a signficant setback when its largest MA plan, Aetna National PPO, saw its rating plunge from 4.5 to 3.5 stars.
Because of the headwinds above, year-over-year revenue growth at CVS has plunged since 2020.
Image Source: Zacks Investment Research
Relative Performance of CVS Shares Trending Down
CVS shares are down-trending and underperforming the general market by a wide margin – a sign of relative price weakness.
Image Source: Zacks Investment Research
Pharmacy Competitions is Heating Up
Major competitors such as Walgreens, Target (TGT) and Wal-Mart (WMT) are expanding their pharmacy businesses.
Bottom Line
Drugstore giant CVS faces numerous bearish headwinds, which are industry and company-specific. Investors should avoid shares over the next 6-12 months.
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2 months ago
Bear of the Day: CVS Health (CVS)
By: Zacks Investment Research | May 8, 2024
CVS Health (CVS) is a Zacks Rank #5 (Strong Sell) that is a prominent player in the health solutions sector in the United States.
The stock has had a rough couple of years but has held up until recently. A recent earnings surprise miss has taken away a lot of hope from investors and the stock has now fallen near COVID lows.
The earnings miss seen last week was the first since 2015, which is making investors very nervous about what the rest of 2024 may hold.
About the Company
CVS has been in operation since its incorporation in 1996 and is based in Woonsocket, Rhode Island. The company employs 219,000.
CVS caters to various customer groups, including employer groups, individuals, healthcare providers, and governmental units. Its Health Care Benefits segment provides health insurance products and services, while the Health Services segment offers pharmacy benefit management solutions. Additionally, the Pharmacy & Consumer Wellness segment sells prescription and over-the-counter drugs, beauty products, and personal care items, operating through various channels such as online retail pharmacies and specialty stores.
CVS is valued at $70 billion and has a Forward PE of 7. The stock holds Zacks Style Scores of “A” in Growth and Value, and “B” in Momentum. CVS pays a dividend of 4.75%.
Q1 Earnings
Last Wednesday, CVS Health reported an EPS miss of $1.31, falling short of the expected $1.69 per share. Revenue also missed estimates, coming in at $88.4 billion compared to the expected $89.2 billion.
This disappointing performance prompted a downward revision of the company's outlook for fiscal year 2024, with adjusted earnings per share now expected to be "at least" $7.00, down from the previous estimate of $8.31.
Similarly, cash flow from operations for FY24 has been revised downwards to at least $10.5 billion, signaling a significant reduction from the previous projection of $12.0-12.5 billion.
Several factors have contributed to this downward revision, including near-term challenges in the Medicare Advantage segment. The company cited a medical benefits ratio of 90.4% in Q1, a notable increase from 84.6% year-on-year, indicating increased pressure on healthcare spending. Additionally, the Health Care Benefits segment witnessed a decline in operating margin from 7.0% to 2.3% year-on-year, reflecting operational challenges and cost pressures.
Management acknowledged the difficulties faced by the company, attributing some of the challenges to external factors such as the cyberattack on Change Healthcare, which impaired the visibility of medical claims in Q1.
Earnings Estimates
Over the last 7 days, earnings estimates have been slashed by analysts.
For the current quarter, estimates plunged from $2.21 to $1.83, or 17%. For the next quarter, estimates have been lowered by 7%.
For the current year, we see an 11% drop, with estimates falling from $8.29 to $7.35
For next year, the last 7 days have seen a 13% drop, falling from $9.08 to $7.94.
Analysts have also been lowering price targets since earnings. Some more notable names include UBS going from $85 to $60 and Morgan Stanley dropping to $65 from $85.
Technical Take
The COVID lows for CVS were just under $52. The stock is now under 10% away from that spot where it may find support.
Additionally, the dividend is around 5%, which could be attractive to investors If interest rates start coming down.
However, the fundamental issues have been showing themselves on the chart for about a year. The stock is down almost 50% since the start of 2023 and should be considered a falling knife that one should avoid.
Investors should be patient and wait until technical support is confirmed. Some levels to watch are $52, $44, and $39.
The 200-day moving average is way up at $72 and the 21-day is at $66.
In Summary
Investors should exercise caution and closely monitor CVS Health's performance in the coming quarters. With headwinds mounting and growth prospects uncertain, the company faces a pivotal juncture in its journey toward sustaining profitability and enhancing shareholder value.
For those interested in the space, a better option might be Walgreens Boots Alliance (WBA). While the company has seen many of the same issues as CVS, the stock is a Zacks Rank #3 (Hold) that is coming off a 46% EPS beat.
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2 months ago
Gear Up for CVS Health (CVS) Q1 Earnings: Wall Street Estimates for Key Metrics
By: Zacks Investment Research | April 26, 2024
The upcoming report from CVS Health CVS is expected to reveal quarterly earnings of $1.69 per share, indicating a decline of 23.2% compared to the year-ago period. Analysts forecast revenues of $89.22 billion, representing an increase of 4.6% year over year.
The consensus EPS estimate for the quarter has undergone a downward revision of 0.4% in the past 30 days, bringing it to its present level. This represents how the covering analysts, as a whole, have reassessed their initial estimates during this timeframe.
Ahead of a company's earnings disclosure, it is crucial to give due consideration to changes in earnings estimates. These revisions serve as a noteworthy factor in predicting potential investor reactions to the stock. Numerous empirical studies consistently demonstrate a strong relationship between trends in earnings estimate revision and the short-term price performance of a stock.
While it's common for investors to rely on consensus earnings and revenue estimates for assessing how the business may have performed during the quarter, exploring analysts' forecasts for key metrics can yield valuable insights.
In light of this perspective, let's dive into the average estimates of certain CVS Health metrics that are commonly tracked and forecasted by Wall Street analysts.
Analysts forecast 'Net revenue- Health Services segment' to reach $41.23 billion. The estimate points to a change of -7.5% from the year-ago quarter.
The combined assessment of analysts suggests that 'Revenue- Pharmacy & Consumer Wellness Segment' will likely reach $29.67 billion. The estimate points to a change of +6.3% from the year-ago quarter.
According to the collective judgment of analysts, 'Revenue- Health Care Benefits' should come in at $30.75 billion. The estimate suggests a change of +18.8% year over year.
The consensus estimate for 'Revenue- Health Care Benefits Segment- Services' stands at $1.44 billion. The estimate indicates a change of +4.6% from the prior-year quarter.
Based on the collective assessment of analysts, 'Medical benefit ratio (MBR)' should arrive at 88.3%. Compared to the present estimate, the company reported 84.6% in the same quarter last year.
The collective assessment of analysts points to an estimated 'Medical membership - Total' of 26,542.28 thousand. The estimate is in contrast to the year-ago figure of 25,513 thousand.
The consensus among analysts is that 'Medical membership - Medicaid - Total' will reach $2.40 billion. The estimate compares to the year-ago value of $2.79 billion.
The average prediction of analysts places 'Medical membership - Medicare Advantage - Total' at 4,031.44 thousand. The estimate compares to the year-ago value of 3,387 thousand.
Analysts expect 'Medical membership - Commercial - Total' to come in at 18,770.50 thousand. The estimate is in contrast to the year-ago figure of 17,988 thousand.
Analysts predict that the 'Medical membership - Insured - Medicare Supplement' will reach $1.35 billion. Compared to the present estimate, the company reported $1.34 billion in the same quarter last year.
It is projected by analysts that the 'Pharmacy claims processed' will reach 463.11 million. The estimate is in contrast to the year-ago figure of 587.3 million.
Analysts' assessment points toward 'Medical membership - ASC - Commercial' reaching 14,253.67 thousand. Compared to the present estimate, the company reported 14,039 thousand in the same quarter last year.
CVS Health shares have witnessed a change of -15.6% in the past month, in contrast to the Zacks S&P 500 composite's -3.2% move. With a Zacks Rank #4 (Sell), CVS is expected underperform the overall market performance in the near term.
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5 months ago
Is the Worst Over for CVS Health Stock?
By: Schaeffer's Investment Research | January 29, 2024
• The security could bounce off the 80-day trendline
• CVS shed more than 16% in the last 12 months
CVS Health Corp (NYSE:CVS) stock was last seen up 0.6% at $73.40, extending a bounce off the $70 level. While the security carries a 16.9% year-over-year deficit and last week fell under its 50-day moving average for the first time since December, there's indication this underperformance could soon be a thing of the past. CVS Health stock's most recent pullback placed it within a trendline with historically bullish implications.
Specifically, CVS is within one standard deviation of its 80-day trendline. Per data from Schaeffer's Senior Quantitative Analyst Rocky White, the security saw no fewer than five similar signals in the last three years, defined for this study as having traded north of this moving average 80% of the time during the last two months, and in eight of the past 10 trading days.
CVS was higher one month later in 80% of those instances, with an average 3.9% gain. A move of similar magnitude from its current perch would place the security back above $76.
Over at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day call/put volume ratio sits in the 80th percentile of its annual range. This means an unwinding of pessimism could boost CVS.
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5 months ago
Healthcare Stocks Slide After Humana Forecast
By: Schaeffer's Investment Research | January 18, 2024
• Humana's disappointing 2023 profit outlook is weighing on healthcare sector
• Humana stock is trading at two-year lows after the report
The healthcare sector is taking a hit after Humana Inc (NYSE:HUM) today slashed its 2023 profit outlook, citing higher-than-anticipated medical costs in the fourth quarter. UnitedHealth Group Inc (NYSE:UNH) and CVS Health Corp (NYSE:CVS) are two notable names falling after the report, as both extend an already rocky start to 2024.
At last glance, Humana stock is trading at two-year lows, down 10.9% at $398.84 -- earlier as low as $390.50 -- and on the short sell restricted (SSR) list. Since last January, HUM is down 17.5%. So far in the options pits, 20,000 calls and 23,000 puts have been exchanged, which is already 4.2 times the average daily volume. The January 2026 400-strike put is the most popular, where new positions are being opened.
Meanwhile, UnitedHealth Group stock was last seen down 2.8% at $510.04, hitting $497.96 at its lowest level today. Sinking below its 140-day moving average, which previously caught a pullback this month, the equity is currently grappling with its 200- and 320-day trendlines. Since last January, the security is up 7.1%. In the options pits, UNH is seeing three times the volume typically seen at this point, with the most activity at the January 500 put.
The shares of CVS Health stock were last seen down 4.6% at $73.42, though potential support lingers just below at the 80-day moving average, as well as former pressure at the $72 region. Today's drop has the stock on track for its seventh daily loss in the last eight sessions. Year-over-year, the equity is down 16.7%. Options traders are targeting CVS at triple the usual intraday volume as well, with new positions being opened at the most active contract, the January 70 put.
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6 months ago
CVS sell-off overdone says HSBC, Walgreens Boots Alliance 'execution risks are significant'
By: Investing | December 22, 2023
HSBC initiated CVS Health (NYSE:CVS) with a Buy rating and Walgreens Boots Alliance (NASDAQ:WBA) with a Hold rating in a note to clients Friday, stating healthcare business models have been in constant flux.
While the market is still quite fragmented, HSBC believes there are attractive growth opportunities.
CVS was assigned a $94 per share price target, implying a potential 21.7% upside from current levels. The bank said the company has an attractive and undervalued moat and is trading at a steep discount to historical levels.
In addition, HSBC said that with the company's shares "down roughly 18% LTM (vs SPX up by 23% over the same period)," the sell-off "appears overdone."
WBA was assigned a $27 per share price target. HSBC believes the company requires operational discipline to improve its execution, boost overall performance, and restore profitability.
Furthermore, while WBA faces "near-term operational challenges," it could unlock value, but the "execution risks are significant," according to analysts.
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7 months ago
CVS Health adds 2% as 2024 revenue outlook tops estimates
By: Investing | December 5, 2023
CVS Health (NYSE:CVS) has forecasted revenue for 2024 to be at least $366 billion, which exceeds the current Street estimate of $345.5 billion.
The company anticipates adjusted earnings per share of at least $8.50, in line with the consensus, with the cash flow from operations projected to be at least $12.5 billion. Updates were shared ahead of the company’s 2023 Investor Day.
CVS shares rose 2.2% on the news.
CVS Health also said it plans to introduce a new pharmacy reimbursement model called CVS CostVantage, aimed at evolving the traditional reimbursement model and providing greater transparency and simplicity.
"We are leading with an approach that will shift how our retail pharmacy is compensated by implementing a more transparent and sustainable model that fairly aligns pharmacy reimbursement to the quality services we provide," said Prem Shah, PharmD, executive vice president, Chief Pharmacy Officer and President, Pharmacy and Consumer Wellness, CVS Health.
This new approach is scheduled to be launched with pharmacy benefit managers (PBMs) for commercial payors in 2025.
The company also reaffirmed its financial guidance for the year 2023. It continues to see adjusted EPS at $8.60 (up or down 10 cents) on revenue in the range of $351.5-357.3 billion.
The average analyst estimate is $8.60 for FY23 EPS on revenue of $353.7 billion.
"We are successfully executing on our strategy to advance the future of health care while unlocking new value for consumers," said CVS Health President and CEO Karen S. Lynch.
CVS Health has approved a quarterly dividend of $0.665 cents per share, marking a 10% increase from the previous dividend of $0.605 cents per share. The dividend will be payable on February 1, 2024, to shareholders of record as of January 22, 2023.
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7 months ago
Bridgewater Associates LP Acquires 212,648 Shares of CVS Health Co. (CVS)
By: MarketBeat | November 24, 2023
• Bridgewater Associates LP boosted its holdings in CVS Health Co. (NYSE:CVS) by 8.6% during the 2nd quarter, according to its most recent disclosure with the Securities and Exchange Commission (SEC). The firm owned 2,686,418 shares of the pharmacy operator's stock after buying an additional 212,648 shares during the period. CVS Health makes up about 1.1% of Bridgewater Associates LP's investment portfolio, making the stock its 17th biggest position. Bridgewater Associates LP owned approximately 0.21% of CVS Health worth $185,712,000 at the end of the most recent quarter...
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8 months ago
CVS Health Giant Prepares for Earnings Call
By: Schaeffer's Investment Research | October 31, 2023
• CVS Health is set post earnings before the market opens tomorrow
• CVS has a history of positive post-earnings moves
Pharmaceutical concern CVS Health Corp (NYSE:CVS) will enter the earnings confessional before the open tomorrow. The mean analyst earnings estimate is $2.13 per share, with revenue expected to rise to $88.25 billion year on year for the third quarter.
Looking back at CVS Health's last eight quarterly reports, the company's shares tend to move higher after earnings. Over the last two years, all but two post-earnings sessions finished positive. The security averaged a 4.4% swing, regardless of direction, the day after reporting results, and the options pits are pricing in a nearly 8.4% move this time around.
Ahead of the event, CVS Health stock was last seen 0.6% higher at $68.44, though it's struggled for most of the year on the charts, down 26.4% in 2023. A mid-August bear gap sent CVS to its lowest level since November 2020, just above the $64.50 mark. The equity pulled sharply back last week as well, though the $66 level stepped up to stymie the losses.
In the options pits, CVS sports 50-day put/call volume ratio of 1.17 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits higher than 92% of all other readings from the past 12 months, suggesting a much healthier appetite for puts over the last 10 weeks.
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9 months ago
CVS Health announces quarterly dividend
Source: PR Newswire (US)
WOONSOCKET, R.I., Sept. 21, 2023 /PRNewswire/ -- CVS Health (NYSE: CVS) has announced that its board of directors has approved a quarterly dividend of sixty and a half cents ($0.605 cents) per share on the Common Stock of the Corporation. The dividend is payable on November 1, 2023, to holders of record on October 20, 2023.
About CVS Health
CVS Health® is the leading health solutions company, broadening access to care for millions of people nationwide. We improve the health of communities across America through our local presence, digital channels and with over 300,000 dedicated colleagues – including more than 40,000 physicians, pharmacists, nurses, and nurse practitioners. We support individuals with their health – whether that's managing health conditions, staying compliant with their medications or accessing affordable health services in the most convenient ways. Our goal is to create seamless connections across the health care system, simplifying the experience and being a trusted partner for every meaningful moment of health. And we do it all with heart, each and every day. Follow @CVSHealth on social media.
CVS Health logo (PRNewsFoto/CVS Health)
Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/cvs-health-announces-quarterly-dividend-301935002.html
SOURCE CVS Health Corporation
Copyright 2023 PR Newswire
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10 months ago
CVS Health Co. (CVS) Stake Lifted by Renaissance Technologies LLC
By: MarketBeat | September 9, 2023
• Renaissance Technologies LLC increased its stake in shares of CVS Health Co. (NYSE:CVS) by 97.9% in the first quarter, according to the company in its most recent 13F filing with the Securities and Exchange Commission (SEC). The fund owned 5,069,953 shares of the pharmacy operator's stock after buying an additional 2,508,500 shares during the quarter. CVS Health comprises approximately 0.5% of Renaissance Technologies LLC's holdings, making the stock its 23rd largest position. Renaissance Technologies LLC owned 0.40% of CVS Health worth $376,748,000 at the end of the most recent reporting period...
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11 months ago
Blue Shield of California looks to cut reliance on CVS, taps Amazon
By: Investing.com | August 17, 2023
(Reuters) -Non-profit insurer Blue Shield of California plans to depend less on CVS Health (NYSE:CVS) as its pharmacy benefit manager and work with others such as Amazon.com (NASDAQ:AMZN) and Mark Cuban's drug firm to reduce reliance on companies that negotiate drug prices.
CVS shares slid over 6%, while rivals Cigna (NYSE:CI) Group and UnitedHealth Group (NYSE:UNH), which also have pharmacy benefit management units, fell 5% and 1%, respectively, in early trade.
Pharmacy benefit managers (PBMs), which maintain lists of drugs covered by health insurance plans and negotiate prices with manufacturers, have recently come under scrutiny from lawmakers for their role in rising healthcare costs.
Blue Shield, which has health plans that cover 4.8 million members, said it will now work with five different companies, including Mark Cuban Cost Plus Drug Company, to provide "convenient, transparent access to medications while lowering costs".
"Many in the industry will likely be watching this situation closely as managing the five partnerships could prove tricky , but if it (Blue Shield) is successful, we could see additional regionals move more in a similar direction," said Elizabeth Anderson, analyst at Evercore ISI.
Blue Shield will still retain CVS Caremark for its specialty pharmacy services, while Amazon will provide delivery of prescription medications as well as upfront pricing. Mark Cuban Cost Plus Drug Company will work to reduce surprise drug costs at the pharmacy pick-up counter.
"We look forward to providing care for Blue Shield of California's members who require complex, specialty medications – as we have for nearly two decades," CVS said in a statement.
Privately held Abarca will pay prescription drug claims, while smaller PBM Prime Therapeutics would work with Blue Shield to negotiate savings with drugmakers, the non-profit insurer said.
Blue Shield said it expects to save up to $500 million in annual drug costs once its multi-year strategy is fully implemented.
The loss of the Blue Shield pharmacy benefit management contract is another blow to Caremark, which is also set to lose the contract to manage Centene (NYSE:CNC)'s $40 billion annual pharmacy needs from next year.
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11 months ago
CVS Health lowers 2024 guidance despite second-quarter profit beat
By: Investing.com | August 2, 2023
CVS Health (NYSE:CVS) reported better-than-expected profit and revenue in the second quarter, but higher medical costs and a sweeping restructuring push led the healthcare giant to lower its 2024 earnings outlook and scrap its 2025 guidance.
Adjusted earnings per shares during the three months until the end of June slipped to $2.21 from $2.53 last year, but still beat consensus estimates of $2.13. Meanwhile, revenue rose 10.3% to $88.92 billion, topping forecasts of $86.41 billion.
"Our diversified business model delivered strong results this quarter," Chief Executive Officer Karen S. Lynch said in a statement. "We continue to execute on our strategy to expand access to health services across our care delivery channels and strengthen our engagement with consumers to improve their health and well-being."
According to Reuters, the Rhode Island-based pharmacy chain said that it would slash about 5,000 non-customer facing roles in order to control expenses following a string of acquisitions. CVS recently purchased home health care services firm Signify Health for $8B and primary care provider Oak Street Health for $10.6B in a bid to expand the scope of the business beyond health insurance and pharmacies.
The group booked a restructuring charge of $496 million that was linked to the layoffs and other impairments, Reuters added.
Meanwhile, CVS backed its 2023 adjusted earnings guidance of $8.50 to $8.70. However, it expects its medical benefit ratio -- a ratio of claims paid to premium collected -- to come in at the higher end of its outlook of 84.7%, plus or minus 50 basis points. The number, which is used by CVS to gauge the performance of its insurance unit, has come under scrutiny following a post-COVID surge in demand for elective surgeries that were delayed during the pandemic.
The company also cut its 2024 adjusted income outlook, citing the impact of both the strategic overhaul and the elevated medical expenses. Chief Financial Officer Shawn Guertin said in a conference call that the firm now sees profit next year at between $8.50 to $8.70 a share, down from the prior forecast of $9 per share. Its 2025 adjusted earnings per share guidance of $10 was also withdrawn.
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11 months ago
CVS Health (CVS) beats profit estimates, starts restructuring to cut costs
By: Investing.com | August 2, 2023
(Reuters) - CVS Health Corp reported better-than-expected second-quarter earnings on Wednesday, and said it had begun implementing a restructuring program to cut costs after a recent spree of acquisitions.
The company has been expanding beyond health insurance and pharmacies with its buyouts of primary-care provider Oak Street Health and home healthcare services firm Signify Health.
CVS Health (NYSE:CVS), which completed the acquisitions earlier this year, has flagged higher-than-expected transaction and integration costs related to the deals.
The company said it recorded $496 million in pre-tax charges related to a restructuring program it started during the quarter to rein in costs.
CVS, which has a large retail pharmacy chain, a health insurance business and a pharmacy benefit management (PBM) unit, has said it would pause acquisitions in the near term but may look at "additional opportunities" over a longer timeframe.
Excluding items, the company reported a profit of $2.21 per share, above analysts' average estimate of $2.11 per share, boosted by strength in its PBM unit, which negotiates drug prices with manufacturers.
Sales at CVS' health services segment, which contains its PBM unit, rose 7.6% to $46.22 billion in the reported quarter compared with a year earlier.
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1 year ago
Keel Point LLC Acquires 9,921 Shares of CVS Health Co. (CVS)
By: MarketBeat | June 16, 2023
• Keel Point LLC grew its holdings in shares of CVS Health Co. (NYSE:CVS) by 26.4% in the first quarter, according to the company in its most recent 13F filing with the Securities and Exchange Commission (SEC). The firm owned 47,499 shares of the pharmacy operator's stock after acquiring an additional 9,921 shares during the period. Keel Point LLC's holdings in CVS Health were worth $3,530,000 as of its most recent filing with the Securities and Exchange Commission (SEC)...
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1 year ago
Is It Time To Bet On CVS?
By: Barchart | June 7, 2023
The June/July issue of Fortune is out. It is dedicated to its Fortune 500 rankings. One CEO who appears prominently in the magazine is CVS (CVS) CEO, Karen Lynch.
Not only does Lynch appear in an article lamenting that despite the number of female and Black CEOs in the Fortune 500, it's still an abysmal record. I couldn’t agree more.
However, that’s not why I’ve brought up Lynch’s name.
The reason I’m talking about Lynch is that she appears in a second article in Fortune’s latest issue discussing Big Healthcare and whether it will be able to fix what ails America’s healthcare system.
CVS stock is down 24% year-to-date and up just 7% over the past five years. While the article paints a positive picture of CVS’s contribution to fixing healthcare in America, the appearance in Fortune could be a curse rather than a blessing.
My big question is whether it’s time to bet on CVS.
The Upside For CVS
First of all, for all those like me who didn’t know this juicy factoid: Fortune points out that the company began life as the Consumer Value Store, hence the CVS acronym. I’m a business history freak, so that’s one to file away, but I digress.
Since Lynch became CEO in 2021, she’s made two mid-sized acquisitions: In September 2022; the company announced that it would acquire Signify Health for $8 billion. It completed its acquisition of the home healthcare provider in late March.
“This transaction advances our value-based care strategy by enhancing our presence in the home,” Lynch stated in CVS’s press release announcing the acquisition’s completion. “Our expanded capabilities will bring us closer to the consumer as we continue to redefine how people access and experience care that is more affordable, convenient and connected."
In February, CVS announced a second multi-billion-dollar acquisition, agreeing to pay $10.6 billion for Oak Street Health. This primary care provider operates storefront clinics in lower-income neighborhoods in 21 states.
“Combining Oak Street Health's platform with CVS Health's unmatched reach will create the premier value-based primary care solution,” Lynch said in February, announcing the deal. “Enhancing our value-based offerings is core to our strategy as we continue to redefine how people access and experience care that is more affordable, convenient and connected.”
The company’s transformation from a pharmacy chain to a pharmacy benefit manager to a primary care provider and, ultimately, to representing your entire healthcare ecosystem started years ago but is now accelerating under Lynch.
“While recognizing that we have shareholders, and a lot of different stakeholders, my personal passion is, ‘How do we improve the health care system?’?” Lynch told Fortune. “We have the opportunity to really drive engagement, simplicity, effectiveness—and to drive patients to the right care at the right time, in the right places.”
While there is no doubt that the stakes are high, if CVS can walk the fine line between altruistically helping patients and profiting handsomely from doing so, five to 10 years from now, those holding over the entire period will be greatly rewarded for their patience and loyalty in the plan.
That said, its stock has performed poorly in recent years precisely because investors doubt its long-term strategy.
The Big Downside to Its Vision
As Fortune points out, CVS is one of several large healthcare companies looking to transform the American healthcare system through value-based care, a panacea that might not come to fruition.
“In conversations with a couple dozen stakeholders, including three former CMS administrators, about Big Health Care’s fitness for the value-based care role, most opinions landed between skeptical and wait-and-see. Will care improve? Maybe, through better coordination. Will it lower costs? Unlikely. Is investment in primary care, whatever the source, a good thing? You bet,” Fortune contributors Maria Aspan and Erika Fry wrote.
So, if doctors, other health practitioners, and patients fail to buy into the value-based model pushed by companies like CVS, the expensive acquisitions Lynch and the company’s previous CEOs have made -- $130 billion since 2006 -- will have all been for nothing.
Let’s put it this way.
Before its acquisition spree began, CVS had $1.6 billion in long-term debt in 2005. That was 10.4% of its total assets. At the end of March, its long-term debt was $56.5 billion, or 23.6% of its total assets, more than double what it was less than 20 years ago.
Sure, its operating profits have grown from $2.0 billion in 2005 to $7.7 billion in 2022, a compound annual growth rate (CAGR) of 8.3%. However, the CAGR of its debt was nearly 23% over the same period.
With higher interest rates, this becomes a far more significant issue should the business model fail to gain the traction necessary to pay for all of this debt incurred.
Is It Time To Bet on CVS?
CVS has a trailing 12-month free cash flow of $17.4 billion. Based on an enterprise value of $145.4 billion, it has a free cash flow yield of 12%. I consider anything over 8% to be in value territory.
So, my answer would be yes, but only if you’re a patient investor. Lynch’s plan could take several years to play out.
I guess we’ll find out.
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1 year ago
CVS Health already bakes in more than the worst-case scenario, TD Cowen 'would add here'
By: Investing.com | May 19, 2023
TD Cowen analysts reiterated an Outperform rating and $111 price target on CVS Health (NYSE:CVS) in a note Friday, telling investors that the current trough valuation "overly discounts" near-term risks.
"We would add here," said the analysts. "Concerns over a number of issues, including PBM transparency and 340B volumes among others, have driven shares down ~25% since Feb., which is much more than a worst-case EPS impact of 16% (lose all 340B vol. & 20% of PBM AOI), or $1.42 to our 2024 adjusted EPS estimate of $9.03."
CVS shares have fallen more than 24% in 2023 and over 25% in the last 12 months, trading above the $69 mark.
They said the shares, which are currently trading near 10-year trough multiples, already bake in more than the worst-case scenario from the headwinds.
"At current levels, we view shares as very attractive, given they do not reflect the likelihood of CVS returning to low double-digit/mid-teens adjusted EPS growth starting in 2025, and recommend adding here," they concluded.
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1 year ago
CVS Health to pause M&A and focus on integration
By: Investing.com | May 3, 2023
(Reuters) -CVS Health Corp said on Wednesday it would pause its recent acquisition spree as it focuses on integrating purchases of healthcare service provider Signify Health and primary care provider Oak Street Health.
CVS, which has a large retail pharmacy chain, and major health insurance and pharmacy benefit manager (PBM) units, like other healthcare rivals has been looking to broaden the services it offers.
CEO Karen Lynch said CVS will focus on integrating Signify and Oak Street with its other businesses in the near term.
Longer term, Lynch said, the company might look at additional opportunities in home or health services.
Rival Walgreens Boots Alliance (NASDAQ:WBA) in January also said it would not strike new deals in the short term after a spate of acquisitions in the healthcare space.
Major companies Amazon.com Inc (NASDAQ:AMZN) and Walgreens have expanded their healthcare business footprints, especially primary and urgent care, as they look to benefit from growth in the sector.
CVS cut its full-year profit forecast on Wednesday to account for transaction and integration costs related to the two deals, and its shares fell 3%.
The earlier-than-expected closing of the Oak Street deal on Tuesday is likely to result in increased interest costs for the year, analysts said. The deal was initially expected to close later this year.
CVS cut its 2023 adjusted earnings forecast to $8.50 to $8.70 per share from its prior view of $8.70 to $8.90.
Morningstar analyst Julie Utterback said investors might be disappointed that the company pushed down its profit forecast after completing the Oak Street acquisition this week.
Lynch said the early closure could weigh on CVS earnings in the short term, but would also enable the healthcare conglomerate to unlock cost cutting synergies earlier.
The company did beat Wall Street estimates for first-quarter profit and revenue on Wednesday, as a recovery in medical procedures boosted sales of prescription drugs.
CVS reported an adjusted profit of $2.20 per share for the first quarter, topping analysts' estimates by 11 cents, according to Refinitiv data.
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1 year ago
CVS Health reports 11% sales growth but cuts full-year earnings outlook as Oak Street deal closes
By: Morningstar | May 3, 2023
Revenues rise across all major business segments, even as regulatory pressures build on prescription-drug middlemen and Medicare Advantage
CVS Health (CVS) reported first-quarter earnings that beat analyst expectations Wednesday but cut its full-year guidance as it digests the acquisition of primary-care provider Oak Street Health.
The early close of the $10.6 billion deal for Oak Street, completed on Tuesday, "will be a short-term headwind" for 2023 earnings, CVS president and CEO Karen Lynch said on a conference call with analysts Wednesday. CVS cut its 2023 guidance for adjusted per-share earnings to a range of $8.50 to $8.70, down from $8.70 to $8.90.
Net income fell to $2.14 billion, or $1.65 per share, from $2.36 billion, or $1.77 per share, in the year-ago period. Excluding nonrecurring items, adjusted earnings per share fell to $2.20, from $2.30 a year earlier, but topped the FactSet consensus of $2.09. Revenue grew 11% to $85.28 billion, beating the FactSet consensus of $80.79 billion.
First-quarter revenues jumped in all three of CVS's major business segments, including healthcare benefits, health services, and pharmacy and consumer wellness.
The Oak Street acquisition comes on the heels of CVS's $7.8 billion acquisition of Signify Health, completed in March, boosting the company's presence in in-home services.
In the health services segment, which includes CVS's pharmacy benefit management business, revenues jumped 12.5% from a year earlier, to $44.59 billion, as the number of pharmacy claims processed increased 4% to 587 million. The results come as CVS, like other major players in the pharmacy benefit management business, faces growing scrutiny at the federal and state level. In Congress, lawmakers on both sides of the aisle have shown interest in reforming some PBM business practices, and executives from CVS and other major PBM players are slated to testify next week before the Senate Health, Education, Labor and Pensions Committee.
CVS has been targeted in some recent state-level actions against PBMs. The Minnesota Department of Commerce earlier this week fined CVS's Caremark PBM arm $500,000, alleging that the company steered patients to pharmacies or mail-order prescription services in which it had an ownership interest. And the Oklahoma Insurance Commission last month filed an administration action against CVS Caremark, alleging similar violations of state law.
CVS did not respond to a request for comment on the state actions. On the conference call Wednesday, Lynch addressed the scrutiny of PBMs generally, saying, "PBMs have consistently been found to operate in a highly efficient market and drive real savings to healthcare customers and members. Every day we deliver product choices for clients and members that help make care more affordable, accessible and simple."
Medicare Advantage is a key growth area for CVS but also faces regulatory pressures, as the federal government adjusts reimbursement rates and makes other tweaks that analysts expect may cut into industry growth. Heady Medicare Advantage growth rates seen in recent years "may decelerate and create some risk to the industry's 2024 growth prospects, in particular," Morningstar analyst Julie Utterback wrote in a recent research note.
"We have a long history of successfully working within Medicare Advantage funding levels to support program stability for our members," Lynch told analysts on the conference call Wednesday. CVS said it expects 12% membership growth in its Medicare Advantage business for the full year 2023. In late March, the City of New York awarded a Medicare Advantage contract for roughly 250,000 city retirees to CVS's Aetna unit--one of the largest client wins in Aetna's history, CVS said.
The end of the COVID-19 public health emergency next week will also make its mark on CVS, Lynch noted on the call Wednesday. The company's Medicaid business saw increased membership in the first quarter, Lynch said, but declines are expected for the rest of the year, after expiration of the public health emergency.
Pandemic-era legislation included a requirement that Medicaid programs keep people continuously enrolled for the duration of the public health emergency, but states can now resume redeterminations of eligibility, which may cause millions of people to lose health coverage, analysts say.
"As Medicaid members face potential disruption in their health benefits, we are using the full breadth of our portfolio of assets to help them avoid coverage losses and maintain positive health outcomes," Lynch said on the call.
In its retail business, CVS remains on track to close 300 stores this year and a cumulative total of 900 stores by 2024, Lynch said.
CVS shares are down 24% in the year to date, while the Health Care Select Sector SPDR ETF (XLV) is down 1.1% and the S&P 500 is up 7.7%.
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1 year ago
Don't Expect CVS Health (CVS) Stock to Sustain Latest Rally
By: Schaeffer's Investment Research | April 4, 2023
• CVS stock is fresh off a two-year low
• CVS has already shed more than 18% this year
CVS Health Corp (NYSE:CVS) stock is trading at $76.17 at last check, pacing for its fourth win in five sessions. CVS carries a hefty 18.2% year-to-date deficit, thanks to a long pullback that started in mid-February before culminating in a March 23, two-year low of $72.10. Despite a brief bounce from this floor, CVS could soon slip again, too, if past is precedent.
The stock's recent low comes amid historically low implied volatility (IV), which has been been a bearish combination before. Schaeffer's Quantitative Analyst Rocky White's data shows three similar signals in the last five years when CVS was trading within 2% of its 52-week low, while its Schaeffer's Volatility Index (SVI) ranked in the 20th percentile of its annual range or lower. This is currently the case with CVS Health stock's SVI of 20%, which ranks in the low 12th percentile of its annual range.
One month after these signals, the equity was lower 67% of the time to average a 4% dip. From its current perch, a move of comparable magnitude would push the shares back below $74.
Additional headwinds could come from a round of downgrades and/or price-target hikes, given 14 of the 18 firms in coverage calling CVS Health stock a "buy" or better. Plus, the 12-month consensus target price of $112.71 is a whopping 48% premium to its current perch.
At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), CVS carries a 50-day call/put volume ratio of 3.87 that sits higher than all but 4% of readings from the past year, suggesting a preference for bullish bets. Should this optimism start to unwind, shares could move lower still.
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1 year ago
AHL Investment Management Inc. Increases Stock Holdings in CVS Health Co. (CVS)
By: MarketBeat | March 23, 2023
• AHL Investment Management Inc. grew its holdings in shares of CVS Health Co. (NYSE:CVS) by 6.2% during the fourth quarter, according to its most recent Form 13F filing with the Securities and Exchange Commission (SEC). The firm owned 31,846 shares of the pharmacy operator's stock after purchasing an additional 1,858 shares during the period. CVS Health comprises about 2.8% of AHL Investment Management Inc.'s portfolio, making the stock its 12th biggest position. AHL Investment Management Inc.'s holdings in CVS Health were worth $2,968,000 at the end of the most recent quarter...
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1 year ago
CVS Health confirms deal to buy Oak Street Health for $10.6 billion
By: Investing.com | February 8, 2023
CVS Health (NYSE:CVS) today confirmed it has reached an agreement to acquire Oak Street Health (NYSE:OSH) for $39 per share in cash, at an enterprise value of about $10.6 billion or an equity value of roughly $9.47B.
"Combining Oak Street Health's platform with CVS Health's unmatched reach will create the premier value-based primary care solution," said CVS Health President and CEO Karen Lynch. "Enhancing our value-based offerings is core to our strategy as we continue to redefine how people access and experience care that is more affordable, convenient, and connected."
The Wall Street Journal reported in recent days that the two companies are close to reaching an agreement. As a result, OSH stock soared about 30% from the start of the week before adding a further 5% in pre-open Wednesday.
"This agreement with CVS Health will accelerate our ability to deliver on our mission and continue improving health outcomes, lowering medical costs, and providing a better patient experience while offering significant value to our shareholders," said Oak Street Health CEO Mike Pykosz.
After the transaction closes, Oak Street Health will become part of CVS Health's recently formed Health Care Delivery organization.
Commenting on the WSJ report, Raymond James analysts said yesterday that the deal is about 5% dilutive at $39 a share.
“Suffice to say that CVS has acknowledged that it is behind its competitors, needs an asset it can scale and OSH is the best asset left… The key uncertainty is what changes CVS might make to OSH’s growth plans, and we note that WBA substantially raised Village MD’s co-located store openings,” they wrote.
CVS shares are up about 1.3% in premarket Wednesday on OSH news, as well as better-than-expected Q4 results.
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1 year ago
CVS nearing $10.5 billion deal for primary-care provider Oak Street Health - WSJ
By: Investing.com | February 6, 2023
(Reuters) - CVS Health Corp (NYSE:CVS) is close to an agreement to acquire primary care center operator Oak Street Health Inc for about $10.5 billion including debt, the Wall Street Journal reported on Monday, citing people familiar with the matter.
The companies are discussing a price of about $39 a share, the newspaper said.
The deal, if it goes through, could be announced as soon as this week, the report added.
CVS and Oak Street Health did not immediately respond to Reuters' requests for comment.
Bloomberg News reported last month that CVS was exploring a deal for Oak Street Health.
Oak Street Health runs primary care centers across the United States for recipients of Medicare, the U.S. government insurance program for Americans aged 65 and older, and has private equity firms such as General Atlantic and Newlight Partners among its shareholders.
CVS had also expressed interest in expanding into the primary care space, and was reportedly among the bidders to acquire primary care provider Cano Health before backing out.
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1 year ago
Earnings Preview: CVS Health Corp. (NYSE: CVS)
By: 24/7 Wall St. | February 6, 2023
• Here is a look at what analysts expect when the following three firms post their results first thing Wednesday morning.
CVS Health
The country’s third-largest provider of health care plans, CVS Health Corp. (NYSE: CVS) has seen its stock price rise dive by almost 21% in the past 12 months. Bloomberg reported last month that CVS is in discussions to acquire Oak Street Health’s brick-and-mortar centers for Medicare patients with low incomes and chronic health issues. New competition from Amazon for prescription drug sales may force CVS to protect its flank and put its diversification plans on hold. That competition is the primary reason for a drop of around 14% in CVS’s share price in just the past three months.
Analysts remain bullish on the stock, with 19 of 27 brokerages having a Buy or Strong Buy rating. The rest rate the shares at Hold. At a recent price of around $85.50 a share, the upside potential based on a median price target of $115.55 is about 35%. At the high price target of $130, the implied upside is 52%.
The consensus revenue estimate for the third quarter is $76.37 billion, which would be down 5.9% sequentially and by 0.3% year over year. Adjusted EPS are forecast at $1.93, down 10.1% sequentially and 2.5% lower year over year. For the full 2022 fiscal year, analysts are looking for EPS of $8.64, up 2.9%, and revenue of $314.7 billion, up about 7.7% year over year.
CVS stock trades at about 9.9 times expected 2022 EPS, 9.6 times estimated 2023 earnings of $8.86 and 8.9 times estimated 2024 earnings of $9.61 per share. The stock’s 52-week trading range is $84.82 to $111.25. CVS Health pays an annual dividend of $2.42 (yield of 2.82%). Total shareholder return for the past 12 months was negative 19.38%.
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