In a report released today, Allen Lutz from Bank of America Securities reiterated a Buy rating on CVS Health (CVS – Research Report), with a price target of $75.00.
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Allen Lutz has given his Buy rating due to a combination of factors influencing CVS Health’s financial outlook. A significant aspect of this decision is the potential earnings growth driven by Aetna’s ability to add $3-$4 to the existing earnings base as it returns to normal profit margins. This scenario suggests that CVS is currently trading at a low multiple of its normalized earnings, which presents an attractive valuation for investors.
Additionally, the substantial operating leverage in CVS’s model, exemplified by the $800 million swing in EBIT from a 1% change in Aetna’s cost trends, further supports this rating. Recent progress in reducing membership in specific plans and setting achievable earnings guidance for 2025 indicates that CVS is on the path to recovery. Furthermore, the negative cycle of earnings revisions appears to be ending, and the current valuation remains favorable. This positive outlook, alongside the potential for continued re-rating of CVS shares, underpins Lutz’s confidence in the company’s future performance, justifying the increase in the price objective to $75.
In another report released today, Barclays also maintained a Buy rating on the stock with a $73.00 price target.