Why CVS Health Corp (CVS) Stock Will Win BIG With Trumpcare

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While companies with "guaranteed" money coming in from the U.S. government, like insurers and hospitals, should be falling on the Trumpcare news, companies without it - like CVS Health Corp (NYSE: CVS ) - should be looking pretty good. So why aren't you buying CVS stock?

Can CVS Health Corp (CVS) Stock Stop Infuriating the Bulls?

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CVS is down roughly 2% so far in 2017, and opened for trade June 23 at $77.22. Its all-time high of $112.47 was reached in the summer of 2015, but its March quarter of $44.5 billion in revenue did not match its September 2016 haul of $44.6 billion.

Still, analysts are expecting better things when CVS next reports Aug. 1. It expects revenue of $45.38 billion, and profits of $1.31 per share, a big jump from the 93 cents per share earned for the March quarter.

Those are good reasons for a trade, but there is a better reason to invest in CVS stock. It starts with its Minute Clinics.

CVS Walk-in Clinics Are Profitable

A Minute Clinic is a part of a CVS store, staffed by a nurse or physician's assistant, that can offer simple health care services, like vaccines, check-ups and treatment for minor injuries and illnesses.

The company is the market leader here, and it had 1,040 of these locations last year . A report by Frost & Sullivan saw revenue for the sector doubling to $4 billion in five years. Not huge for a company with 2016 revenue of $177 billion, but the benefits go beyond the clinics themselves.

The growth estimates, meanwhile were made before last year's election, when it was assumed the number of uninsured would stabilize. Now, with TrumpCare, that's no longer true. A lot more people are going to be uninsured, or find themselves with policies that don't cover them adequately.

MinuteClinics have doctors as back-ups, but most of their work is routine. They make heavy use of technology to assure nurses aren't doing more than they're legally able to. They're also an attraction that can make users more loyal to the store around them.

CVS is also getting into the insured space, as with a recent deal with Cigna Corporation (NYSE: CI ) called Cigna Health Works , under which the MinuteClinics deliver services under Cigna's self-insurance plans.

Self-insurance is one of the decade's big drivers of savings for major employers. Insurers run the plans, and employers just pay for the care their employees use, rather than paying premiums based on anticipated use. This gives employers an incentive to encourage wellness, check-ups and compliance with doctor instructions.

Health Works, which is branded to Cigna, lets people use MinuteClinics for routine screenings and gives them discounts on CVS over-the-counter products. Cigna customers pocket the savings, MinuteClinic gets the customers. It's a win-win.

CVS Stock: Above the Competition

CVS was supposed to have had its growth stymied by Wal-mart Stores Inc (NYSE: WMT ), which is copying the clinic model in some stores, and the entry of, Inc. (NASDAQ: AMZN ) into the pharmacy space.

But CVS is the unquestioned leader in the clinic space, and it already has a technology platform that can be readily expanded to do anything Amazon might want to do, including telemedicine, in which a doctor or nurse appears on a computer screen to offer instructions, conduct routine tests and soothe patient nerves.

The real problem for CVS stock is with Caremark, its Pharmacy Benefit Manager. The PBM space has been depressed ever since UnitedHealth Group Inc (NYSE: UNH ) bought Catamaran Corp two years ago for $12.8 billion , taking the work for the country's largest insurer by far in-house.

The Bottom Line

CVS stock is not a slam-dunk here, and it's not a big growth stock, but it's woefully undervalued. The company should continue to easily out-earn its 50 cents per share dividend, which yields 2.59% at the stock's current price. If it doesn't fall completely short of estimates when it reports in August, the stock should start rising again.

Right now, you're getting the future benefits of Trumpcare to CVS for free, and the company will pay 2.6% on your money to wait for them.

Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time , available now at the Amazon Kindle store. Write him at or follow him on Twitter at @danablankenhorn . As of this writing, he owned shares in AMZN.

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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.

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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