CVS Health Corp (NYSE:CVS) has two things it didn't have during the past few years: a clear path to accelerating earnings growth; and appropriately reset expectations, according to Bank of America analysts.
In an update to clients, the analysts noted the healthcare company’s earnings per share (EPS) targets of at least $8.50 in 2024 and 6% growth in 2025 are more than achievable.
"In 2025, CVS will benefit from the return of Stars bonus payments and Medicare Advantage pricing that fully incorporates higher utilization," the analysts wrote.
They added that both factors provide CVS with the ability to manage and accelerate earnings growth in 2025.
Analysts at Bank of America also stated that CVS' new pharmacy reimbursement model could create a more stable environment for generics prices, which could help distributors benefit from firmer sell-side prices, given pharmacies would also be incentivized to report higher acquisition costs.
CVS' new model, if adopted, could create more stable profit streams for distributors, they wrote.
Shares of CVS Health rose nearly 3% to $81.23 in early afternoon trading on Tuesday but have fallen 13% over the past year.