Near-term headwinds to set the direction
On April 15, Oppenheimer downgraded CVS Health (CVS) stock to “perform” from “outperform” and removed its price target of $85. CVS Health’s strategic initiatives are expected to drive long-term growth. However, near-term challenges are expected to set the direction for its stock.
CVS Health is facing higher reimbursement pressure, which is affecting its bottom line. CVS Health’s EPS are projected to decline in the coming quarters, reflecting higher reimbursement pressure, price compression, and deflation in generics.
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Analysts expect CVS Health’s top line to grow at a stellar double-digit rate in the coming quarters on the back of the Aetna deal. However, its bottom line is projected to decline by about 4% in fiscal 2019. The company’s management expects its EPS to be in the range of $6.68–$6.88 in fiscal 2019, which implies a YoY decline of about 3% to 6%.
On April 11, BMO initiated coverage on CVS Health stock with a “market perform” rating and a target price of $58 per share. Meanwhile, on April 10, SunTrust Robinson reduced its target price to $65 from $85. Meanwhile, Evercore ISI lowered its target price on CVS stock to $67 from $71.
CVS Health is down 17.2% on a YTD basis as of April 15. The recent decline stems from expected pressure on earnings in the near term. In comparison, Walgreens Boots Alliance (WBA) stock has fallen 20.6% so far this year as the company faces similar challenges.