JP Morgan Downgrades Omnicare Following CVS Deal

In a report published Monday, JP Morgan analyst Lisa C. Gill downgraded the rating on

from Overweight to Neutral, while raising the price target from $90 to $98. The analyst believes that there is limited upside to the stock following the announcement of the proposed acquisition of Omnicare by

. According to the JP Morgan report, "[O]n May 21, CVS Health announced that it had entered into a definitive agreement to acquire Omnicare for $98 in cash. The transaction is expected to close near the end of 2015." Analyst Gill expects the deal to be positive for CVS Health, allowing the company "to enter a new channel serving the high utilizing senior population and provides a significant synergy opportunity both on the cost and revenue side." The analyst believes that CVS Health would be the best strategic fit for Omnicare, and that another bidder is unlikely to emerge going forward. Omnicare reported its Q2 results, with the EPS below the Bloomberg consensus but above the estimate, driven by increased revenue and gross profit with lower SG&A. Revenue beat both the estimates and the consensus, rising 7.6 percent year on year. LTC revenues and scripts were, however, below the estimates.