Skip to main content

Shares of CVS (CVS) were downgraded by Credit Suisse, with the analysts saying they see 2019 as a transitional year for the healthcare company.

The stock fell 1.1% to $52.90 on Monday.

Credit Suisse, which downgraded shares of CVS to neutral from outperform, also lowered its price target to $61 from $73, with the new price target still representing roughly 15% upside. 

CVS is "facing a transitional year as it tries to drive seismic changes in health care," Credit Suisse analysts wrote. Management recently tabbed 2019 as a transition year in its earnings report.

"While CVS has a long-term road map, its pharmacy operations have been adversely affected by efforts to reduce prescription drug costs," Credit Suisse said.  

While CVS's initiative to reduce drug costs to the customer have spurred increased use of generic drugs, "which positively affects operating income," the analysts said that "competitive pressures in the PBM marketplace have led CVS's Caremark unit to commit to performance guarantees with respect to rebates and pharmacy cost trends that have further squeezed profitability." 

Integration of Aetna - CVS closed the acquisition of Aetna in 2018, also a risk, the analysts said. 

The analysts lowered their earnings per share expectations on CVS for 2019 and 2020 to $6.75 from $6.78 and $7.20 from $7.90, respectively. 

"We would like to see visibility improve on a return to earnings growth before becoming more constructive," Credit Suisse said.

CVS is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells CVS? Learn more now.