CVS Health Gains On Pharmacy Services, Strategic Buyouts

On Jun 8, we issued an updated research report on Rhode Island-based pharmacy retail giant CVS Health Corp. (NYSE:CVS) , which provides integrated offerings across the entire spectrum of pharmacy care.

Post a mixed first-quarter 2017 performance, CVS Health was observed trading neck to neck with the broader Retail - Pharmacies and Drug Stores industry. Per last three months’ share price movement, the stock is currently trading a bit ahead of the broader industry.

On a positive note, strong Pharmacy Services numbers benefited from the upside in Specialty Pharmacy. The company’s strong PBM selling season also appears encouraging.

Despite a soft bottom-line scenario in first quarter, the company has reiterated 2017 earnings outlook, indicating chances of a forthcoming recovery. We believe, both Omnicare and Target Pharmacy buyouts have already started to benefit CVS Health on multiple prospects. This should significantly drive the enterprise value in days ahead.

The stock has lost 2.2% over this period, narrower than the 3% loss of the broader industry.

Additionally, the company anticipates a market share gain in the specialty pharmacy suite of services with differentiated specialty offerings, providing a high level of clinical support to patients.

Per a recent data, three million people in the U.S. are currently in need of specialty treatment and the potential cost for this tends to be very high. With management emphasizing that CVS Health’s specialty business remains a top priority for the customers, it is well-positioned to tap this opportunity based on broad, differentiated offerings, including the likes of Specialty Connect.

However, given the highly competitive retail pharmacy business, shareholders of CVS Health predict severe threats from the $17.2 billion mega merger between Walgreens and Rite Aid, once the deal closes. Also, sluggish economic conditions in the U.S. might hamper company’s profit margin.

Zacks Rank & Key Picks

CVS Health currently carries Zacks Rank #3 (Hold). Few better-ranked medical stocks are Align Technology, Inc. (NASDAQ:ALGN) , Inogen, Inc. (NASDAQ:INGN) and Accelerate Diagnostics, Inc. (NASDAQ:AXDX) . Align Technologyand Inogen sport a Zacks Rank #1 (Strong Buy), while Accelerate Diagnostics carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Align Technologyhas an expected long-term adjusted earnings growth rate of almost 22.8%. The stock has added roughly 44.1% over last three months.

Inogen has a long-term expected earnings growth rate of 17.5%. The stock has a solid one-year return of around 79.9%.

Accelerate Diagnostics has an expected long-term adjusted earnings growth rate of 30%. The stock has added roughly 13.1% over last three months.

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