Shares of CVS Health (CVS) closed 2.8% higher on Thursday after the health solutions company announced a new retail footprint strategy aligned to evolving consumer needs.
As part of its strategic plan, CVS Health plans to create new store formats to boost consumer engagement. Three distinct models are in pipeline to serve as community health destinations. These include sites for primary care services, reformed HealthHUB locations with products and services for daily health needs and traditional CVS Pharmacy stores with retail offerings. (See CVS Health stock charts on TipRanks)
Plan in Detail
As part of this initiative, CVS Health has planned to reduce store density in some locations and shut down 900 stores over the period of next three years. These changes are likely to commence in the spring of 2022.
The planned store closures are expected to record an impairment charge between $1 billion and $1.2 billion in the fourth quarter of 2021 or between $0.56 and $0.67 of diluted earnings per share associated with the write-down of operating lease right-of-use assets and property and equipment.
Further, the company has updated its 2021 GAAP EPS guidance range to $5.46 to $5.67 from $6.13 to $6.23.
Markedly, the company expects the impact on adjusted EPS to be immaterial in 2021 and 2022, and modestly accretive in 2023 and thereafter. Additionally, it affirms the 2021 adjusted EPS guidance range of $7.90 to $8 and cash flow from operations guidance range of $13 billion to $13.5 billion.
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The CEO of CVS Health, Karen S. Lynch, said, “Our retail stores are fundamental to our strategy and who we are as a company. We remain focused on the competitive advantage provided by our presence in thousands of communities across the country, which complements our rapidly expanding digital presence.”
CVS Health has also come up with some organizational changes, including the assumption of the newly created role of Chief Pharmacy Officer by Prem Shah, the EVP of specialty pharmacy and product innovation.
Wall Street’s Take
On November 11, UBS analyst Kevin Caliendo maintained a Buy rating on the stock and raised the price target to $106 (11.18% upside potential) from $97.
Consensus among analysts is a Strong Buy based on 14 Buys and 2 Holds. The average CVS Health price target of $108.94 implies 14.26% upside potential. Shares have gained 44.3% over the past year.
TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into CVS’ performance this quarter.
According to the tool, the CVS Health website recorded a 4.37% monthly increase, year-over-year, in global visits in October. Meanwhile, Q4 depicted quarter-to-date growth in 2021 of 4.37% more than quarter-to-date growth a year ago. Additionally, year-to-date website traffic, compared to the same period last year, has increased 84.55%.
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