Pre-market trading for CVS Health Corporation (NYSE:CVS) fell 1% on Tuesday after Evercore ISI cut its rating on the stock from “perform” to “in line,” citing a cloudy future for the pharmacy retailer that also operates a health insurance company and a pharmacy benefits manager.
The analysts, under the direction of Elizabeth Anderson, outline operational risks for CVS (CVS) in 2024, such as the loss of the PBM contract with the health insurance Centene (CNC), which last year chose the Express Scripts division of Cigna (CI) to handle approximately 20 million of its members.
Additionally, Evercore ISI highlights a “very competitive” annual enrollment period (AEP) and the most recent CMS star rating reduction for the business’ Aetna National Medicare Advantage plan.
The company thinks that COVID benefits will go down and that CVS (CVS), which will do more than 32 million COVID-19 tests and give out more than 59 million COVID-19 vaccines in 2021, will have trouble getting paid.
CVS Stock Forecast
Evercore ISI has set a target price of $100 per share for CVS (CVS), which is equivalent to an 8x target for the 2023 EBITDA projection and an 11x target for earnings. The company is trading at a reasonable premium to its competitors, so this is a fair target.
Many investors are looking for dependable companies with consistent dividends because the market predictions for 2023 are all over the place. This is especially true given that the S&P 500 index has dropped more than 19% so far this year.
The shares of CVS Health stock (CVS -0.91%), a diversified healthcare business that checks all the right reliability boxes, have handily outperformed the S&P 500. Because it provides the kinds of items people can’t live without easily, like prescription drugs or medical supplies, its product is recession-resistant.
CVS Stock To Gain From Signifiy Health Acquisition
CVS: Ready for Expansion
With the purchase of Aetna and the addition of in-house clinics, CVS Health has done a great job of changing its business model from a drug store to a healthcare provider. The stock has lost a little over 9% so far this year, although its finances seem to be improving.
While increasing earnings per share (EPS) for the fourth straight year, the corporation is on course to generate more than $315 billion in revenue this year, up from $292 billion in 2017. It recorded $238.6 billion in sales for the first nine months of this year, up 10.7% from the same period last year. In addition, the company increased its EPS forecast from $5.95 to a range of $7.23 and $7.43.
The firm got rid of a cloud when it reached a $5 billion settlement in November to end a lawsuit over opioids. The money will be paid out over 10 years.
Four years after spending $70 billion to buy the health insurance company Aetna, CVS has gone back to its usual practice of raising its dividends every year. The company’s quarterly dividend was frozen at $0.50 per share from 2018 to 2021, but last year it increased it by 10% to $0.55, and a further 10% rise to $0.605 in 2023 has already been approved. Its current yield of 2.60% is higher than the S&P 500 average of 1.82%.
The company is in a better position to grow now that its quarterly net debt has gone down by 47% and its quarterly revenue has gone up by 21% over the last three years. The company’s Health Care Benefits Segment has been a key contributor, with nine-month sales of $68.4 billion, up 11.2% annually. More on The Motley Fool
Featured Image – Pexels © Chokniti Khongchum
Author Jowi Kwasu