Shares of drugstore operator and pharmacy benefits manager CVS Caremark Corp. are approaching their full value according to a BMO Capital analyst who lowered his rating on the stock to "market perform" from "outperform."
Analyst Dave Shove said in a Monday night research note that company shares are trading at about 12.3 times his estimate for adjusted 2013 earnings per share. His $47 price target on the stock represents a 2013 price to earnings multiple of nearly12.75.
"We continue to believe that solid execution and external market dynamics have positioned the company for good growth in the near term but feel shares now reflect much of the anticipated earnings expansion," Shove wrote, adding that competitors like Catalyst Health Solutions Inc. provide more of an opportunity for share appreciation.
Shove said he expects CVS to win new accounts for next year, which will create positive news in this year's first half. But he also anticipates marketplace disruption from the pending combination of two large pharmacy benefits managers, Medco Health Solutions Inc. and Express Scripts Inc.
CVS Caremark, based in Woonsocket, R.I., runs one of the nation's largest drugstore chains and also operates a pharmacy benefits management, or PBM, business. PBMs run prescription drug plans for employers, government agencies and other clients, using their large purchasing power to negotiate lower drug prices and make money by reducing costs for health plan sponsors and members.
CVS shares fell 41 cents to $45.95 Tuesday when the market opened.