CVS Health Inc.
is looking forward to the chance to meet tons of new shoppers in the coming months as it administers the COVID-19 vaccine, offering the pharmacy retailer a unique business opportunity.
CVS has provided COVID-19 testing, with about 15 million tests administered at its 4,800 locations across the country, according to Karen Lynch, chief executive of CVS.
The pharmacy retailer has also launched a program, Return Ready, designed to help companies and universities prepare for the return of workers and students, with 100 clients enrolled.
The federal government selected CVS to administer COVID vaccines at long-term care facilities, administering more than three million doses to patients and workers. By mid-March, CVS says it will have administered both doses of the vaccine at assisted-living facilities.
As part of President Joseph Biden’s COVID vaccination plan, CVS will administer 250,000 COVID immunizations across 11 states.
“Millions of new customers will engage with CVS Health for the first time through testing and vaccine administration services,” Lynch said during last week’s earnings call, according to FactSet.
“It will create the opportunity to expand our customer base, while deepening relationships with current customers.”
Truist analysts say there are a few factors that set CVS up for gains, including “market pressures, rising patient consumerism and increased demand for
de-centralized care.” Expanding access to low-cost care through MinuteClinic and expanding its virtual care offering are just a couple of examples.
“The company’s meaningful COVID testing/vaccine response is offering
additional patient connectivity (most signing up digitally), broadening the new customers playing field and we see the potential for additional acceleration as vaccine distribution further ramps,” David MacDonald said.
Truist rates CVS stock buy with an $80 price target.
Even with all of the interaction CVS says COVID-19 “is expected to have an immaterial impact” on 2021 adjusted earnings per share.
CVS reported a fourth-quarter EPS and adjusted EPS decline, though results beat the FactSet consensus. Higher revenue also beat the FactSet consensus.
“COVID-19 is expected to have a benefit to the retail/long-term care segment and have an unfavorable temporal impact to the health care benefits segment,” Eva Boratto, CVS’ chief financial officer, said on the earnings call.
JPMorgan analysts note that COVID-19 was a 25-cents-per-share net adjusted EPS tailwind in 2020.
“Within the retail/long-term care segment in 4Q, the company pointed to lower pharmacy volumes from a reduction in new therapy prescriptions, including fewer seasonal flu prescriptions, reduced front store traffic and volume from a lower cough/cold/flu season, incremental costs ahead of vaccine administration, and benefits from diagnostic testing,” analysts said.
Still, JPMorgan thinks the company is well-positioned for a future that includes new reimbursement models, the “retailization” of healthcare, and the need for cost savings.
“We continue to believe the ability to leverage medical, pharmacy and lab data to target interventions, improve member engagement to drive behavior change, and drive care to lower cost settings will drive improved quality of care, better outcomes and lower overall healthcare costs, which will ultimately drive profit growth,” analysts said.
JPMorgan rates CVS shares overweight with a $102 price target.
Mizuho analysts are also upbeat about the increasingly diverse nature of CVS’ business. Moreover, as the COVID pandemic comes to a close, colds and the flu should make a return.
“The weak cold/flu season is expected to continue in 1Q:21 and likely 4Q:21,” Mizuho said. “We view this a transitory issue that should normalize in 2022.”
Mizuho rates CVS stock buy with an $82 price target.
CVS shares are up 4.2% over the past three months, but have fallen 2.7% over the last year. The benchmark S&P 500 index
has gained 16.3% over the last 12 months.