Is CVS Health Corp (NYSE:CVS) the Best Bet In Pharma Retail?
CVS Health Corp (NYSE:CVS) delivered impressive first quarter earnings, reaffirming once again why it is a safe bet in the Pharma retail space. Better than expected quarterly revenue and earnings could be the fuel the stock needed to edge higher, having stagnated in a tight range for the better part of last year and this year.
CVS Health Corp (NYSE:CVS) is threatening to break out of the $102 and $104 a share tight range, at the back of strong fundamentals that support a potential upside run. The stock is already 7% up for the year as other stocks continue to grapple with one of the worst starts to a year.
Focusing On Automation
Supporting the impressive run is the company’s new business model. CVS is betting big on automation as it continues to transition from a brick and mortar store to more of an online store. The business is now growing by about 15% a year, thanks to the new model that involves dispensing a good chunk of prescription drugs through the mail.
Given that retail business is highly competitive, the online business model has allowed CVS to better its margins in the business. A 19% increase in revenue in the first quarter to highs of $43.2 billion is a testament that the company is in the right direction under the new model.
Over the past five years, CVS Health Corp (NYSE:CVS) has bumped its dividend payout 31%. The trend should continue, given the way the company s automating its business as it looks to generate more revenues that should sustain the payouts.
Acquisitions to Drive Growth
CVS is not only relying on organic growth as it looks to grow its market share and income base. Acquisitions are increasingly becoming a part of its growth strategy as it also looks for ways to adapt to changes in the pharmacy benefit-management business. Last year it completed two acquisitions as the race for new opportunities for growth heats up.
The purchase of Omnicare for $12.9 billion should lead to significant purchasing and revenue synergies going forward. The company’s Long Term Care Division that provides products to Long-term care facilities and senior populations all but provides CVS Health Corp(NYSE:CVS) access to a market destined for growth.
Growing Market Share
Even as CVS continues to automate its operations, its retail footprint remains intact. The acquisition of Target’s pharmacy and clinic business came with 1,672 stores, which should go a long way in bolstering the company’s market share. Providing customers a convenient way of accessing services is the company’s big play in this case as it looks to safeguard and grow its revenue streams.
CVS will continue to control more than 50% pharmacy/drugstore market share in the US given its expansive and expanding footprint. With Walgreens Boots Alliance Inc (NASDAQ:WBA), struggling to finalize the proposed $17 billion takeover of Rite Aid Corporation (NYSE:RAD), CVS could gain even more going forward.
CVS Health Corp (NYSE:CVS) has yet to replicate the 2011- 2015 rally that saw the stock soar by more than 170%. Given that it has remained flat for the better part of the year edging higher looks more likely.
Growth drivers are working in favor of CVS Health Corp (NYSE:CVS), making a strong case of why the stock is a buy at the current levels. Management expects revenue to grow by 17% this year. Adjusted earnings, on the other hand, should grow by at least 11.25% to between $5.73 and $5.88 further affirming why it could be the best bet in the Pharma retail space.
Latest posts by Viraj Shah (see all)
- Tesla Motors Inc (NASDAQ:TSLA)’s Elon Musk Is Going After Semi Truck Industry - November 17, 2017 04:37 AM PDT
- Tesla Motors Inc (NASDAQ:TSLA) Is Not “Hotbed for Racist Behavior” - November 15, 2017 06:58 AM PDT
- Nikola Tesla and Tesla Motors Inc (TSLA) – The Past & Future of the World You Cannot Ignore- Part 1 - May 15, 2017 05:11 AM PDT