CVS Health (CVS) Stock Price Target Increased by Analysts

NEW YORK (TheStreet) -- CVS Health (CVS) stock price target increased to $125 from $120 by analysts at Jefferies who maintained their "buy" rating.

The action comes after the company on Thursday announced the acquisition of the pharmacy services provider Omnicare (OCR) in a deal worth $12.7 billion. The deal is expected to extend CVS Health's operations in dispensing prescription drugs to assisted-living and other long-term care centers, The New York Times reported.

"We view the acquisition positively as it bolsters Specialty RX and provides more access to desirable senior patients," Jefferies analysts said.

The purchase allows CVS to broaden its reach in the specialty pharmacy arena, as about a quarter of Omnicare's net sales in 2014 came from its specialty unit, the Times said.

In Friday's early morning trading, shares of CVS are slightly down 0.01% to $103.68.

TheStreet Ratings team rates CVS HEALTH CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate CVS HEALTH CORP (CVS) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel its strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 0.3%. Since the same quarter one year prior, revenues rose by 11.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • CVS HEALTH CORP has improved earnings per share by 12.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, CVS HEALTH CORP increased its bottom line by earning $3.96 versus $3.75 in the prior year. This year, the market expects an improvement in earnings ($5.17 versus $3.96).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Food & Staples Retailing industry average. The net income increased by 8.1% when compared to the same quarter one year prior, going from $1,129.00 million to $1,221.00 million.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 34.15% over the past year, a rise that has exceeded that of the S&P 500 Index. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • The current debt-to-equity ratio, 0.35, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that CVS's debt-to-equity ratio is low, the quick ratio, which is currently 0.60, displays a potential problem in covering short-term cash needs.
  • You can view the full analysis from the report here: CVS Ratings Report

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