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CVS Health (CVS) 2021 Selling Season Strong, LTC Arm Suffers

On Dec 4, we issued an updated research report on CVS Health CVS. Increasing demand for both Pharmacy Benefit Management (PBM) and specialty pharmacy is a steady key driver. The company currently carries a Zacks Rank #3 (Hold).

Over the past three months, shares of CVS Health have outperformed its industry. The stock has improved 20.3% compared with 18.1% rise of the industry.

CVS Health ended the third quarter of 2020 on a promising note with both earnings and revenues surpassing the respective Zacks Consensus Estimate. Particularly, Retail/LTC revenue rise was primarily driven by increased prescription volume and higher front store revenues. The Health Care Benefits arm benefited from strong Medicare AEP (Annual Enrollment Period) driven by CVS Health’s leading position in zero premium plans, expanded geographic footprint and continued acceleration of dual D-SNP offerings.

Moreover, while Pharmacy Services revenues declined year over year, this segment delivered double-digit operating income growth, reflecting strength in specialty pharmacy along with favorable purchasing economics. The 2021 selling season too is wrapping up well with $3.3 billion of net new business. Increased guidance amid the pandemic scenario is a positive.

CVS Health Corporation Price

CVS Health Corporation Price

CVS Health Corporation price | CVS Health Corporation Quote

CVS Health’s specialty digital solutions for patients witnessed 25% CAGR over the last two years, and since the start of the pandemic the company has seen over 40% of all specialty orders being placed digitally. In terms of COVID-19 testing, till the time of the third-quarter earnings release, the company conducted more than six million tests, representing about 70% of the testing done in a retail setting nationwide and doubled the number of testing sites across the country to more than 4,000.

On the flip side, in the third quarter of 2020, CVS Health registered Pharmacy Services revenues were down 0.9% on continued client losses and price compression. Within Retail/ Long Ter Care (LTC), the company faced continued reimbursement pressure and the impact of recent generic introductions.

The LTC business continues to facing some industry-wide challenges. Reimbursement risk continues to be a dampener.

Key Picks

Some better-ranked stocks from the broader medical space are Hologic, Inc. HOLX, Thermo Fisher Scientific Inc. TMO and ResMed Inc. RMD.

Hologic’s long-term earnings growth rate is estimated at 17.4%. The company presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Thermo Fisher’s long-term earnings growth rate is estimated at 18%. It currently carries a Zacks Rank #2 (Buy).

ResMed’s long-term earnings growth rate is estimated at 14.5%. The company presently carries a Zacks Rank #2.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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