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On Thursday, Bernstein SocGen Group adjusted the price target for CVS Health (NYSE:CVS) stock, raising it significantly to $71.00 from the previous $52.00, while keeping a Market Perform rating on the shares. The adjustment follows CVS Health’s reported fourth-quarter earnings for 2024, which surpassed consensus expectations. According to InvestingPro data, CVS has seen strong momentum with a nearly 50% year-to-date return, while currently trading at a P/E ratio of 18.14.Want deeper insights? InvestingPro analysis shows CVS is currently undervalued, with 11 analysts recently revising their earnings estimates upward for the upcoming period.
The company’s adjusted earnings per share (EPS) for the fourth quarter came in at $1.19, which was 29% higher than the consensus estimates. A key factor contributing to the better-than-expected results was the medical loss ratio (MLR), which was reported at 94.8%, 70 basis points below the consensus. This improvement was partly attributed to favorable prior reserve development from the second and third quarters. Additionally, net investment income (NII) also exceeded expectations, reaching $755 million compared to the consensus of $422 million. The company maintains a solid financial position with an EBITDA of $12.62 billion and has demonstrated its commitment to shareholder returns, maintaining dividend payments for 55 consecutive years with a current yield of 4.01%.
CVS Health experienced stable utilization trends in the fourth quarter, with medical costs coming in lower than their most pessimistic projections. This pattern is in line with results seen across other Managed Care Organizations (MCOs). Specifically, in the Medicare Advantage sector, CVS observed continued elevated trends influenced by inpatient services, supplemental benefits, and pharmacy costs. Within Medicaid, CVS faced higher acuity levels and adjusted over 40% of their book in early January to align with increased medical costs, anticipating approximately a 4% rate increase in their Medicaid book for 2025. The Individual business segment also saw continued elevated utilization, particularly in specialist, inpatient, and ambulatory services.For comprehensive analysis of CVS’s financial health and future prospects, InvestingPro subscribers can access detailed reports showing the company’s "GOOD" overall financial health score and extensive peer comparison metrics.
The increased price target to $71 from $62 is largely driven by a raised target price-to-earnings (P/E) ratio from 8.3x to 11.0x, reflecting enhanced confidence in the earnings potential of Aetna, which is a part of CVS Health. The next twelve months’ EPS forecast has been adjusted to $6.49, up from the previous estimate. With analyst targets ranging from $48.01 to $91.43, and a consensus recommendation of 1.82 (Buy), the market appears optimistic about CVS’s growth trajectory.
Bernstein’s revised target and maintained rating indicate their belief that while CVS Health’s current performance is strong, particularly with Aetna’s earnings as a key contributor, the stock is adequately valued at present. The firm’s analysis suggests that CVS Health is positioned to maintain a stable financial performance going forward.
In other recent news, CVS Health reported better-than-expected fourth-quarter results for 2024, with an adjusted EBIT of $2.73 billion, surpassing the Street’s estimate of $2.30 billion. The company’s adjusted earnings per share (EPS) also exceeded expectations, coming in at $1.19 compared to the anticipated $0.91. Meanwhile, Raymond (NSE:RYMD) James raised its price target for CVS Health to $75, maintaining an Outperform rating, following these impressive results. Similarly, Truist Securities increased its price target to $76 and upheld a Buy rating, citing strong fourth-quarter performance and promising 2025 guidance.
Cantor Fitzgerald maintained its Overweight rating with a $71 price target, highlighting CVS Health’s significant exposure to Medicaid-related revenues and the potential impact of state-level healthcare policies. In another development, CVS Health board member Michael F. Mahoney purchased approximately $2 million worth of company shares, indicating confidence in the company’s future. Additionally, Thermo Fisher Scientific (NYSE:TMO) appointed former CVS CEO Karen S. Lynch to its board of directors, expanding its board to 12 members. These recent developments reflect a period of strategic moves and positive financial performance for CVS Health.
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