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CVS Health's Selling Seasons Strong, Omnicare Arm Upsets

Zacks Equity Research

On Jan 13, we issued an updated research report on CVS Health CVS. Increasing demand for both Pharmacy Benefit Management (PBM) and specialty pharmacy is a steady key driver. The company currently carries a Zacks Rank #3 (Hold).

Over the past three months, shares of CVS Health have outperformed its industry. The stock has rallied 15.4% compared with the 10.9% growth of its industry.

The company posted better-than-expected third-quarter 2019 results, demonstrating successful execution of its strategic priorities. This led to all its three segments’ in-line or solid performances. Going by its strategic agenda, CVS Health is currently on track to make approximately 50 hubs operational by this year-end along with its original plan to have 1,500 hubs active by the end of 2021. The company already started witnessing increased customer traffic and incremental sales in pharmacy front store and MinuteClinics.

CVS Health Corporation Price

CVS Health Corporation Price

CVS Health Corporation price | CVS Health Corporation Quote

In terms of segmental performances, year-over-year growth in the top line was driven by a strong Pharmacy Services segment, benefiting from the upside in specialty services. We are also pleased with CVS Health’s sturdy progress in the 2020 and 2021 selling seasons.

The company’s 2020 PBM selling season is nearing completion with gross new business growing by $1.1 billion and net new business improving by approximately $1 billion since the sequential quarter’s update.

The 2021 selling season is now underway and per the company, it is well-positioned to serve both the new and the existing clients.

The company’s recently-launched Health Care Benefits segment following the Aetna acquisition is showing a robust momentum, particularly in government business.

On the flip side, Omnicare business performance is likely to have been soft through 2019. In the third quarter, persistent reimbursement pressure and the impact of recent generic introductions had a bearing on the company’s retail LTC business.

Stocks to Consider

A few better-ranked stocks from the broader medical space are Haemonetics Corporation HAE, Hill-Rom Holdings, Inc HRC and Vapotherm, Inc VAPO.

Haemonetics currently has a Zacks Rank #1 (Strong Buy) and a projected long-term earnings growth rate of 13.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hill-Rom’s long-term earnings growth rate is estimated at 11.7%. The company currently carries a Zacks Rank #2 (Buy).

Vapotherm’s long-term earnings growth rate is estimated at 49.5%. It currently holds a Zacks Rank of 2.

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