CVS - Embedded Expectations Analysis - 2020 12 17
CVS Health Corporation (CVS:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 14.0x Uniform P/E, implying bearish expectations for the firm. Although management's concerns about coronavirus, their existing capabilities, and Aetna Connected suggest the potential for near-term headwinds, market expectations are overly bearish, and longer-term equity outperformance is likely warrantedSpecifically, management may lack confidence in their ability to normalize medical utilization levels, continue converting their HealthHUBs in this environment, and further develop and expand their existing capabilities. Furthermore, they may have concerns about the continued industry disruption of their Aetna acquisition, the potential of Aetna Connected, and their zero copay MinuteClinic benefit. Management may also lack confidence in their ability to sustain overall business growth, drive new tools to their Caremark business, and continue benefiting from expanded coronavirus
testing. Moreover, they may have concerns about the coronavirus' impact on EPS,
their tools in administering the coronavirus vaccine, and the reimbursement for the
potential vaccine
− Although management's concerns about near-term headwinds suggest the potential
for volatility, given the firm's potential operational inflection from the Aetna
acquisition, market expectations are overly bearish, and longer-term equity
outperformance is likely warranted for CVS
CVS Health is a health company. The company's segments are: Pharmacy Services, which provides a range of pharmacy benefit management solutions, including plan design offerings and administration, formulary management, and retail pharmacy network management services; Retail/Long-Term Care (LTC), which sells prescription drugs and general merchandise, including over-the-counter drugs, provides health care services through its MinuteClinic? walk-in medical clinics and conducts LTC pharmacy operations; and Health Care Benefits, which provides a range of voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental and behavioral health plans.
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