Josh Nathan-Kazis Updated Oct. 15, 2019 10:32 am ET / Original
Oct. 15, 2019 9:58 am ET
CVS Health is a
industry-spanning monolith—a vertically integrated company that owns pharmacies,
a pharmacy-benefit manager, and a health-insurance company. In a note out
Tuesday morning, a J.P. Morgan analyst said that is a major
strength.
“We believe the company is one of the best
positioned companies across our coverage universe over the longer term,” wrote
J.P. Morgan analyst Lisa Gill, who rates the stock Overweight, with
an $88 price target. The stock closed at $62.99 on Monday. “We are positive on
the company’s integrated healthcare model…and believe the company’s broad suite
of services, strong clinical capabilities and continuity of care across care
settings position it well to benefit from changing market dynamics over the
longer term.”
The back story. Shares of CVS Health (ticker: CVS) are down
3.9% this year, trailing the S&P 500 Health Care sector, which is up 3.9%.
In September, a federal judge overseeing an unusual postdeal challenge to
CVS’s acquisition of Aetna approved the
deal.
What’s new. Gill wrote that the benefits of the model will boost the
whole company, but that it will particularly help the health-care benefits
segment.
“We believe new products, services and capabilities
available under the integrated model will directly benefit the HCB business,
creating a competitive advantage,” Gill wrote. “CVS expects strong growth to
continue in the HCB segment in 2020, largely driven by synergies.”
Looking forward. “Management has previously discussed the
opportunity to drive medical cost savings through better medical management,
improved member engagement and shifting care to lower cost settings (including
increased utilization of CVS assets),” Gill wrote. “Longer term, CVS believes
this can ultimately drive improved retention and membership growth.”
CVS Health will announce its quarterly
earnings on Nov. 6. Shares of the company were up 1.1% to $63.70 early Tuesday.
The Dow Jones Industrial Average was up 0.5%.
Corrections & Amplifications
CVS Health will announce its quarterly results
on Nov. 6. A previous version of this article incorrectly stated that the
announcement was scheduled for Nov.
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