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CVS Shares Break Above $69 Level Following ISI's Upgrade to Strong Buy

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ISI Group's Ross Muken upgraded CVS Corporation (NYSE: CVS) from Buy to Strong Buy early Wednesday morning. The analyst maintains a $78.50 price target.

Muken believes a recent pullback in CVS shares (the stock is down almost 4 percent since the beginning of 2014) has created "an attractive buying opportunity for a world class large-cap franchise..." The analyst called CVS a "must own large cap name in healthcare."

Muken pointed to CVS' enterprise-based strategy delivering "impressive core growth over a multi-year period" and said this trend should continue over the medium term. The ISI analyst also said he likes the company's "highly shareholder-friendly capital deployment program (>$5 Bn returned to shareholders via share repo and dividends in 2013) and a pristine balance sheet (2.7x adj. debt/EBITDA that provides for upside optionality)."

"We see the greatest opportunities for upside via MinuteClinic (37% revenue CAGR since 2007), Managed Medicaid expansion (CVS has largest market share with ~28% of covered lives), specialty (new Specialty Connect offering), improved generic sourcing (recent JV with CAH that could be ~4% accretive post implementation), and the ACA exchanges (unique positioning on carve in / out basis for over 80+ health plan clients)," according to Muken.

The ISI analyst highlighted the following upcoming catalysts:

  • Q4 results on Feb. 11th;
  • insight from next year's PBM selling season; and,
  • added "color on drug utilization trends and US consumer spending."

Shares of CVS are trading up more than 1 percent to $69.12 heading into the last hour of trade.

Latest Ratings for CVS

DateFirmActionFromTo
Dec 2014SunTrust Robinson HumphreyUpgradesBuy
Dec 2014BarclaysMaintainsOverweight
Dec 2014JP MorganMaintainsOverweight

View More Analyst Ratings for CVS
View the Latest Analyst Ratings

Posted-In: Analyst Color News Upgrades Price Target Analyst Ratings

 

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