قالب وردپرس درنا توس
Home / Business / CVS Health: Patience Guarantee – CVS Health Corporation (NYSE: CVS)

CVS Health: Patience Guarantee – CVS Health Corporation (NYSE: CVS)



Incredibly, CVS Health (CVS) has lost 50% of the value since trading over $ 110 all the way back in 2015. The pharmacy company has just completed a large merger with Aetna driven by debt and to no surprise hit the stock new multi-year downturns. Large debt burden and a confusing business model lay the foundation for the opportunity in a stockpile.

  CVS Health logo Image source: CVS Health website

Hard to manage

While CVS Health can promote the integrated health solutions from the addition of health services, the business benefits from Aetna, the company cannot change the wide range of one company that now has $ 250 billion in annual revenue. The new business includes a massive retail business that includes 10,000 pharmacies, a pharmacy's distributor in Caremark and a healthcare manager in Aetna.

The addition of significant debt burden gives little room for errors in a complex business to navigate, especially with the government expanding efforts to reduce drug prices. The company is uniquely positioned to cope with medical cost-saving opportunities, but CVS Health does not necessarily seem to benefit from the scenario that the government wants some of the intermediaries to take to provide savings to the industry.

Source: CVS Health Q4 & # 39; presentation

Thus, the company sounds like the future leader in the health care system that provides improvements in health outcomes at lower costs. By CEO Larry Merlo at Q4 Earnings Call:

CVS Health is in a superior position to lead the change needed in the fragmented US health care system with our convincingly fully integrated health services, our unrivaled community assets, proven pharmacy and a commitment to collaborate with healthcare professionals to achieve the very best results for the patients and clients we serve.

On the other hand, the company does not see any benefits that many people will see the $ 15 billion in revenue from CVS Health distributed to others in health care, including primarily savings for patients. As such, the company listed the following reasons for an EPS hit in 2019:

  • Decline in generic funds.
  • Lower brand inflation.
  • Ongoing questions about drug dependencies.
  • CVS Specific Challenges in the Long Term

The result is that previous CVS units forecast operating revenues. The retail business forecasts a 10% decline to $ 6.6 billion, and the Pharmacy Services Group forecasts a low-digit figure down to $ $ 4.888 billion.

The end result is a mega-merger that does not see the projected results that either the Company used to purchase Aetna to hide the weakness of older businesses or CVS Health lost focus on these businesses during the merger.

Keep it simple

Where the shares become interesting, the company is keeping the game plan simple. CVS Health has significantly expanded its debt levels over the past few years, with net debt reaching nearly $ 67 billion, and costing the company over $ 3 billion in annual interest costs.

  Table Data by YCharts

Company forecast about $ 15 billion in revenue in 2019, so debt levels are not a lifting issue, but a strategic nightmare for a company that cannot meet financial targets from the big business .

Only CVS Health needs to repay debt and prove the model where multiple primary care services are offered at retail outlets via MinuteClinic is a winning strategy. Based on these early results, the main concern is that the key customers using such services are cost-conscious looking for a good deal. A big difference exists between being the company that offers patients in the health care system and wants profitable services that these patients need.

Company forecast 2019 free cash flow of $ 7.5 billion with extra cash after paying about $ 2 billion in annual dividends to repay debt. CVS Health has lots of short-term debt engines that are not a major problem with this cash flow business, but the company still needs to eliminate the risk through debt payments and refinancing of other maturities.

Source: CVS Health Q4 & # 39; presentation


Source link