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Investing.com - TD Cowen has maintained its Buy rating and $95.00 price target on CVS Health (NYSE:CVS), suggesting the company could benefit from challenges facing Centene (NYSE:CNC). According to InvestingPro data, Centene currently trades at a P/E ratio of 5.23 with analyst targets ranging from $45 to $92, reflecting mixed market sentiment amid current challenges.
The firm’s analysis indicates that issues affecting Centene’s Health Insurance Exchange (HIX), Medicaid (MDCD), and Medicare Advantage (MA) lines of business could potentially represent upside for CVS if similar patterns emerge in CVS’s business mix. Despite these challenges, Centene maintains strong fundamentals with $153.27 billion in revenue and an overall "GREAT" financial health score from InvestingPro, which offers 8 additional key insights about the company’s performance.
TD Cowen estimates that comparable challenges in CVS’s Individual & Family Plan (IFP) line of business would have a significantly smaller impact on CVS’s 2025 adjusted earnings per share, representing only a 3.9% potential reduction compared to an implied 38% impact for Centene.
The difference in vulnerability stems from CVS’s more diversified revenue mix, with individual business comprising only 5% of its Health Care Benefits (HCB) premium revenue, compared to approximately 20% for Centene according to the firm’s estimates.
TD Cowen also highlighted that favorable Medicare Advantage and Prescription Drug Plan trends noted by Centene could ultimately represent a 1% upside to the firm’s 2025 CVS adjusted EPS estimate, while noting that CVS plans to exit the Individual & Family Plan market in 2026.
In other recent news, Centene Corporation has withdrawn its fiscal year 2025 guidance due to unexpected challenges in ACA Exchange risk adjustment calculations and elevated Medicaid cost trends. The company disclosed a significant $1.8 billion under-accrual in Health Insurance Exchange risk adjustments, impacting earnings per share by $2.75. This development has led to a mixed reaction from analysts, with Truist Securities maintaining a Buy rating and a price target of $84, while Cantor Fitzgerald lowered its price target to $65 and Jefferies adjusted theirs to $47. Centene’s Medicare Advantage and Prescription Drug Plan segments are reportedly performing better than anticipated, providing some offset to the challenges faced in other areas. Additionally, Centene plans to implement pricing actions for 2026 to address these issues. The company is also in the process of refiling 2026 ACA Exchange rates to reflect the new data. Despite these hurdles, TD Cowen reiterated its Buy rating with a price target of $73. Morgan Stanley (NYSE:MS) also maintained its Overweight rating and a $70 price target, emphasizing the potential for improved SG&A expense leverage.
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