On Feb 13, we issued an updated research report on CVS Health CorporationCVS . The company carries a Zacks Rank #3 (Hold).
This leading provider of integrated services across the entire spectrum of pharmacy care has been outperforming the broader industry over the past year. The stock has lost 12.2% compared with the broader industry's 18% decline.
Notably, CVS Health exited the fourth quarter of 2017 on a solid note with both earnings and revenues surpassing the Zacks Consensus Estimate. Year-over-year growth in the top line was driven by a strong Pharmacy Services segment, which in turn benefited from an upside in the Specialty Pharmacy.
Investors are hopeful about the company expected to earn $750 million drawn from near-term synergies as a result of the Aetna acquisition deal post the transaction's closure.
Per the company, shareholders can look forward to several outcomes with respect to near-term synergy including enhanced competitive positioning and a new combined platform, which might redefine access to high-quality care at low cost, substantially accelerating growth of the consolidated business.
We are also upbeat about the company's strong Pharmacy Services business, which has been flourishing on a solid Specialty Pharmacy subsegment. In fact management stated that the company's specialty business is its top priority in winning new customers and retaining the old, loyal ones. Accordingly, CVS Health is poised to capitalize on this opportunity with wide and differentiated offerings including Specialty Connect.
Additionally, management expects drug price inflation, product launches, higher utilization and new PBM clients to fuel growth. Also, the Pharmacy Services segment appears as a stable growth platform.
With regard to its 2018 PBM (Pharmacy Benefit Management) selling season, CVS Health is noted to have progressed well in the fourth quarter. The company boasts gross client wins of approximately $6.2 billion and net new business of $2.4 billion with a client retention rate of about 96.5%. Good news is that the company also advances with its 2019 selling season.
Moreover, the company's strong cash balance allows it to carry out share repurchases.
On the flip side, CVS Health's highly competitive retail pharmacy business is a big concern. Precisely, the company faces some stiff competition in the pharmacy segment due to availability of low-cost pharmacy options and other retail businesses consistently adding pharmacy departments in its portfolio. Particularly, discount retailers have made substantial inroads into gaining a major market share. Moreover, CVS Health has delivered sluggish numbers within the retail Long Term Care business in the recent past. The company's decision to restrict itself from participating in the TRICARE network and many fully-insured prime networks was dictated by the negative impact on Pharmacy sales and script comps.
Stocks Worth a Look
Some better-ranked stocks in the broader medical space are Centene Corporation CNC , athenahealth, Inc. ATHN and BIOVERATIV Inc. BIVV , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Centene has an impressive projected long-term growth rate of 14.6%. The stock has returned 23.2% over the last six months.
athenahealth has an expected long-term growth rate of 23.1%. The stock has gained 7.3% over the last three months.
BIOVERATIV has an expected long-term growth rate of 14%. The stock has soared 87.2% over the last three months.
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