CVS - Embedded Expectations Analysis - 2021 05 28
CVS Health Corporation (CVS:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 15.4x Uniform P/E, implying bearish expectations for the firm. Although management's concerns about Medicare membership, their growth positioning, and Aetna cost efficiency suggest the potential for near-term headwinds, market expectations appear overly bearish, and long-term outperformance is likelySpecifically, management may lack confidence in their ability to maintain their Medicare membership base, sustain engagement across their expanded set of digital health services, and continue converting existing commercial members to Medicare Advantage. In addition, they may be exaggerating the strength of their growth positioning as well as their potential to be a behavioral health provider. Furthermore, they may lack confidence in their ability to improve Aetna's cost efficiency, pay down debt obligations, and return shareholder value. Finally, they may have concerns about vaccine hesitancy, and they may lack confidence in their ability to connect physical health with mental health
Although management's concerns about Medicare membership, growth positioning, and cost efficiency suggest the potential for near-term headwinds, market expectations appear too bearish given the potential of the firm's capabilities post-Aetna acquisition. As such, long-term 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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