CVS Health Faces Challenges: Hold Rating Due to Lower EPS Forecasts and Segment Pressures

Analyst Charles Rhyee from TD Cowen maintained a Hold rating on CVS Health (CVS – Research Report) and keeping the price target at $59.00.

Charles Rhyee has given his Hold rating due to a combination of factors affecting CVS Health’s near-term outlook. The anticipated earnings per share for the first quarter are below consensus expectations, which suggests a tough quarter ahead for the company. Rhyee expects the management to maintain their previous earnings per share guidance for 2024 despite the predicted weaker second quarter. Elevated utilization trends, a challenging consumer environment, and mixed results in pharmacy services are expected to weigh on the upcoming quarterly performance, particularly in comparison to consensus expectations.

Additionally, the Health Care Benefits (HCB) segment is projected to remain under pressure due to high medical benefit ratios, which have been adjusted upwards previously. The Medicare Advantage bids for 2025 are expected to focus on profitability over membership growth, aligning with management’s past strategy. Rhyee also highlights potential weaknesses in the Pharmacy Services Segment (PBM) due to a deceleration in branded inflation and concerns about increased out-of-store health (OSH) utilization. A weaker consumer environment, indicated by softer sales and traffic data from retail comparables, is likely to affect the retail segment of CVS Health as well.

Based on the recent corporate insider activity of 52 insiders, corporate insider sentiment is positive on the stock. This means that over the past quarter there has been an increase of insiders buying their shares of CVS in relation to earlier this year.

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CVS Health (CVS) Company Description:

Headquartered in Rhode Island and founded in 1963, CVS Health Corp. is a healthcare company in the U.S. that owns CVS Pharmacy, a retail pharmacy chain; CVS Caremark, a pharmacy benefits manager; Aetna, a health insurance provider, among many other brands.