CVS Health(CVS) ZACKS·2025-01-06 16:35Stock Performance - CVS Health's stock is trading near its 52-week low, closing at 43 56 reached on Dec 23 [2] - The stock has lost 29 9% in the past three months, underperforming the Zacks Retail - Pharmacies and Drug Stores industry's 29% dip and the S&P 500's growth of 3 8% [3] - CVS Health's stock is trading below its 50-day and 200-day moving averages, indicating potential further downward momentum [6] Financial and Operational Challenges - CVS Health is considering a strategic restructuring plan to reduce costs by 5 29 per share, with 12 downward revisions in the past 60 days [9] - The company's Medicaid business is experiencing a medical benefit ratio (MBR) of 95 2%, up 950 basis points year over year, indicating higher medical costs relative to premiums [14] Industry-Wide Issues - The retail pharmacy industry is facing a reimbursement crisis, with payors shrinking reimbursements below the cost of buying and dispensing prescription drugs [12] - CVS Health, like its peers, is severely affected by this crisis, with shrinking margins and earnings despite revenue expansion [13] Valuation - CVS Health's forward 12-month price-to-earnings (P/E) ratio is 7 44X, a premium to the broader industry average of 6 99X and higher than peers like Walgreens Boots (6 44X) and Herbalife (3 97X) [17] Future Outlook - CVS Health is optimistic about 2025, focusing on strengthening its position in Medicare Advantage and expecting 100 to 200 basis points of margin recovery [19] - Improved Star Ratings in 2025 could generate a $700 million tailwind, depending on membership retention levels [20] - The company is progressing on innovative pharmacy models and biosimilar strategies, with strong growth from its subsidiary Signify Health [21] Market Sentiment - The market has not been impressed with CVS Health due to business-specific and industry-wide challenges, including job cuts and increased Medicare Advantage utilization trends [22] - The stock's current position below its moving averages and stretched valuation suggests potential resistance or further pullback in share price [23]