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Bloomberg Columnist: Investors Should Question CVS Outlook Following Writedown

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Bloomberg Columnist: Investors Should Question CVS Outlook Following Writedown

CVS Health Corp (NYSE: CVS) stock came under pressure Wednesday as the 2015 acquisition of Omnicare dominated headlines. The pharmacy chain announced a $2.2-billion writedown of the Omnicare business in conjunction with its fourth-quarter results.

What Happened

What's important for investors to keep in mind, as the stock lost 7 percent following the announcement, is that CVS company started as a drugstore and evolved into pharmacy benefits management through the $21-billion 2006 acquisition of Caremark, Bloomberg's David Wilson said on Wednesday's "Bloomberg Markets."

The 2015 acquisition of Omnicare was meant to give the company exposure to selling drugs to nursing homes and long-term care facilities. The M&A has continued, with the most recent being the acquisition of Aetna.

Why It's Important

"It's a matter of the [Omnicare] deal not going the way that the company expected," Wilson said. "And when you have this company that's been built on dealmaking, you have to ask are things going to work out going forward and that 2019 earnings forecast kind of clouds these things as well."

What's Next

CVS now faces a challenge in putting all of its businesses together now that the acquisition of Aetna is finalized, Wilson said. The company does have a track record of fully integrating prior acquisitions, but there is "a lot that needs to be done," especially considering CVS' larger size after multiple acquisitions, he said. 

CVS shares were down 8.01 percent at $64.29 at the time of publication Wednesday. 

Related Links:

Raymond James: CVS A Strong Buy Despite Pricing Headwinds

Bank of America's Favorite Stock Ideas For 2019

Posted-In: Bloomberg David WilsonNews Health Care M&A Media General Best of Benzinga

 

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